The Department of Justice has launched an investigation of Standard & Poor’s concerning the rating of mortgage securities packaged by Wall Streets firms and sold around the world. This is political retribution for their downgrade of the United States to AA+ after Congress and the president failed to institute any substantial spending reductions. S&P gave the United States fair warning on July 15th that they would downgrade our credit rating unless validated spending cuts of $4 trillion were approved.
So why is Eric Holder playing with fire? Any investigation will prove that Moody’s and Fitch were also complicit in their reviews so the nuclear fallout will not be contained to Standard & Poor’s. The government’s blackmail of our banks by the Community Reinvestment Act and the Congressional Black Caucus is part of this scandal. The following Congressional hearing on Fannie Mae and Freddie Mac gives a small example of their behavior:
Moody’s and Fitch must also be investigated and share in any punishment handed out by the DOJ. Depending on how far this goes, one or both of these credit rating agencies will downgrade the United States if pushed too far and this could be the tipping point for our entire economy.
And this might be what the plan has been from the beginning.
The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.
The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.
In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns.
It is unclear if the Justice Department investigation involves the other two ratings agencies, Moody’s and Fitch, or only S.& P.