DoJ to S&P: How dare you rate our mandated securities so highly, or something

posted at 8:01 am on February 5, 2013 by Ed Morrissey

In other words, no good deed goes unpunished.  The Department of Justice filed a lawsuit against credit rater Standard & Poor’s yesterday almost five years after the collapse of the housing bubble nearly destroyed the financial sector.  The DoJ blames S&P for giving mortgage-backed securities (MBS) unreasonably high ratings, which allegedly misled investors into believing them to be a safe bet:

The Justice Department sued Standard & Poor’s Ratings Services late Monday, alleging the firm ignored its own standards to rate mortgage bonds that imploded in the financial crisis and cost investors billions. …

The government was seeking penalties of more than $1 billion, another person close to the talks said, which would be the biggest sanction imposed on a firm related for its actions in the crisis.

S&P officials also were rattled that the government was pushing the company to admit wrongdoing that could leave it more vulnerable to pending or new lawsuits by investors.

If that isn’t full of hypocrisy and irony, there’s also this:

S&P said Monday that it “would be wrong” to contend that its ratings were “motivated by commercial considerations and not issued in good faith.”

This lawsuit is breathtaking in its hypocrisy.  After all, S&P didn’t issue mortgage-backed securities and insist that the housing bubble could go on forever.  The MBS blizzard came from the two GSEs, Fannie Mae and Freddie Mac. Congress authorized them to securitize the paper they bought from lenders in order to encourage riskier loans to buyers who otherwise wouldn’t have qualified for home loans. And that was motivated not by normal regulatory concerns or “good faith,” but by political considerations and a desire by both Democrats and Republicans to conduct social engineering rather than regulate rational markets.

It was Congressional intervention, not S&P, that fueled the irrational demand on both sides of the lending markets.  People bought houses they couldn’t afford, took out home equity loans on equity that never really existed, and lenders shoved money into the hands of people who couldn’t even establish that they had an income (remember No Income Verification-No Down loans?). S&P and other rating agencies may have erred in rating these bonds as highly as they did, but the Congressional intervention behind the GSE-issued MBSs left everyone with the very distinct impression that the government would stand behind these bonds.  And guess what?  They were correct.  In the end, Congress bailed out Fannie and Freddie.

This lawsuit is just an attempt to shift blame away from the real culprits: Congresses from 1998-2008.  Why? Because if Washington DC can blame the ratings agencies instead of the bond issuers and their enablers inside the Beltway, then they can circle back around again and start distorting the lending markets for their social engineering.  Plus, it’s not a bad revenge for that credit downgrade in August 2011, either.


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Comment pages: 1 2

It should be Barney Frank and his boy friend in the dock…

Jabba The Cat on February 5, 2013 at 8:04 AM

Pathetic

Faat & Furious meh

Ed will you have a post on the drone memo? Another if this happened under W part 4,832

cmsinaz on February 5, 2013 at 8:05 AM

Eric Holder is a moron who gives morons a bad name!

pilamaye on February 5, 2013 at 8:07 AM

Messaging

Electrongod on February 5, 2013 at 8:08 AM

It really is time to cut the gov’t down to size, 10th Amendment anyone?

tim c on February 5, 2013 at 8:08 AM

Aw c’mon, but it felt good when home ownership was so high, didn’t it? Let’s remember what’s important here.

trubble on February 5, 2013 at 8:10 AM

It should be Barney Frank and his boy friend in the dock…

Jabba The Cat on February 5, 2013 at 8:04 AM

Christopher Dodd? Pretty sure they just dated briefly. ;0

Seriously, I find it interesting that (once again) stuff that should have been discussed during the first term of the rat-eared wonder only makes it into discussion after the filthy bastard gets a second term, his grifter wife doesn’t have to move, and his brats can stay at an exclusive DC school where they cost the taxpayers millions in security every year.

I don’t agree with what DoJ is doing but the fact that they’re interested in this and not the activities of the Friends of Angelo says all that needs to be said about the corruption inside the beltway.

Happy Nomad on February 5, 2013 at 8:11 AM

so they’re finally admitting it wasn’t Bush’s fault

Slade73 on February 5, 2013 at 8:11 AM

Plus, it’s not a bad revenge for that credit downgrade in August 2011, either.

It’s all about downgrading Teh SCOAMT’s bonds.

Steve Eggleston on February 5, 2013 at 8:14 AM

This lawsuit is just an attempt to shift blame away from the real culprits

this post is a pathetic attempt to shift the blame solely onto fannie and freddie.

sesquipedalian on February 5, 2013 at 8:15 AM

Aw c’mon, but it felt good when home ownership was so high, didn’t it? Let’s remember what’s important here.

trubble on February 5, 2013 at 8:10 AM

High levels of home ownership wasn’t the problem. It was the fact that many “homeowners” had no business owning a home or at least the home they owned. I remember a story in the WaPo, written with the usual leftist slant, about a woman kicked out of her home and forced to relocate to an apartment. It was your typical article about how cruel banks are.

Well, as the story goes on, it is disclosed that the woman not only moved to a new area when she bought the home but her sole source of income was a daycare to be run out of a $450K home with an income somewhere around $63K/year. In other words, not only was this woman trying to start a business without an established clientele but she was doing it in a home that she had no business buying in the first place. And yet….. that is somehow the banks’ fault.

Happy Nomad on February 5, 2013 at 8:16 AM

Does Warren Buffet have an investment in Fitch or Moody’s by chance?

Just wondering.

PappyD61 on February 5, 2013 at 8:17 AM

Someone read a copy a “Predator Nation” and tell me that the rating services weren’t corrupt or incompetent up their ears?

To dismiss this lawsuit as something with no foundation is ignorance.

Conservatives need to stop reflexively taking offense at government action against corporate crooks at all levels……including these rating services.

rickyricardo on February 5, 2013 at 8:18 AM

this post is a pathetic attempt to shift the blame solely onto fannie and freddie.

sesquipedalian on February 5, 2013 at 8:15 AM

They are the biggest culprits. Too bad S&P didn’t have the foresight to give Barney Frank’s boyfriend a make-do job to protect them from the consequences of their actions. Because, as we all know, Barney Frank will put out for whoever gives him the biggest bribes. Makes you wonder what that Senate appointment cost that even a whore like Frank wasn’t able to deliver enough to get the job.

Happy Nomad on February 5, 2013 at 8:18 AM

this post is a pathetic attempt to shift the blame solely onto fannie and freddie.

sesquipedalian on February 5, 2013 at 8:15 AM

as opposed to the shameless progressive lie that it was Bush’s fault?

there’s plenty of blame to go around, and Ed notes Republicans were in on it. There’s also the Community Reinvestment Act. Clinton repealed Glass Steagall….

Slade73 on February 5, 2013 at 8:20 AM

Fannie Freddie and the Fed will funnel 1 trillion dollars to S&P. S&P will enter a settlement for 500 billion….The DOJ has the headline they want…and the big banks get what they want(more money) and the American taxpayers get screwed….

DVPTexFla on February 5, 2013 at 8:21 AM

They are the biggest culprits.

Happy Nomad on February 5, 2013 at 8:18 AM

nonsense. this is a convenient lie perpetuated by conservatives unwilling to face up to the fact that the policies they championed and the free market they so cherish have failed in such spectacular fashion. as i said, pathetic.

sesquipedalian on February 5, 2013 at 8:22 AM

It should be Barney Frank and his boy friend in the dock…

Jabba The Cat on February 5, 2013 at 8:04 AM

No, actually Holder would like some of the pre-teen foriegn hookers that Menendez always seems to find.

The kenyan probably would like a round or two with barney.

acyl72 on February 5, 2013 at 8:23 AM

sesquipedalian on February 5, 2013 at 8:22 AM

lol, nevermind

you’re dumb

Slade73 on February 5, 2013 at 8:23 AM

HOLDER 2016!!!

Hells Bells if Big Sis is gonna run….why not Big Bro?

Plus he’s 100% black and might even have “authentic” slave blood. The media would llllllove him.

PappyD61 on February 5, 2013 at 8:24 AM

Happy Nomad on February 5, 2013 at 8:16 AM

I was more commenting on the motivation for Barney and good ol’ Andrew Cuomo in Clinton’s HUD, and the other Liberal do gooders, and their remarkable ability to ignore basic math and act surprised when the whole thing falls apart. Y’know, the feeling vs thinking thing.

I saw a similar story about a woman facing foreclosure, the whole story couched in how unfair the bank was being. Later you find out the loan was for an 850k second home on which she defaulted in a matter of months. Why, it was so horrible, she almost had pull her kids out of private school! The injustice of it all…

trubble on February 5, 2013 at 8:24 AM

Conservatives need to stop reflexively taking offense at government action against corporate crooks at all levels……including these rating services.

rickyricardo on February 5, 2013 at 8:18 AM

And liberals need to stop pretending that the whole system set up by Dodd/Frank didn’t cause the housing bubble by forcing lenders to give greedy stupid people (i.e. what we now call Obama parasites) more money than they should have been lent. Admit that before attacking credit rating agencies.

Happy Nomad on February 5, 2013 at 8:24 AM

remember No Income Verification-No Down loans?

What about No Income, No Job, and no Asset (NINJA) loans? They’re even egregious.

blammm on February 5, 2013 at 8:25 AM

GOP leadership-AWOL once again.

Mr. Arrogant on February 5, 2013 at 8:27 AM

as opposed to the shameless progressive lie that it was Bush’s fault?

because it’d never occur to you to blame obama for the economy.

there’s plenty of blame to go around, and Ed notes Republicans were in on it. There’s also the Community Reinvestment Act. Clinton repealed Glass Steagall….

Slade73 on February 5, 2013 at 8:20 AM

so you’re blaming clinton for glass steagall but forget to mention that it came from a republican initiative led by phil gramm and supported by the big banks. you think i’m stupid or what?

sesquipedalian on February 5, 2013 at 8:31 AM

‘blaming clinton for *the repeal of* glass steagall’, obviously

sesquipedalian on February 5, 2013 at 8:32 AM

nonsense. this is a convenient lie perpetuated by conservatives unwilling to face up to the fact that the policies they championed and the free market they so cherish have failed in such spectacular fashion. as i said, pathetic.

sesquipedalian on February 5, 2013 at 8:22 AM

Go back to Jimmah and Bubba.

Under Carter, the community reinvestment act was passed, which required banks to lend to people with poor credit so they could buy houses, or the banks would be penalized. The banks’ prior practices, i.e., requiring a decent credit score, were deemed raaaaacist.

Then we get to Bubba, who, when he wasn’t molesting women, expanded the CRA with the help of treasury secretary Robert Reich and HUD secretary…..Andrew Cuomo!

And Reich was a friend of Sandy Weill, president of Citbank. Sandy didn’t like being president of a regional commercial bank, and wanted to play with the big boys in investment banking. But we had this barrier called Glass-Steagel, from the stock market crash aftermath.

So Bubba, when he wasn’t molesting women, got Congress to “modernize” banking by repealing this. Commercial banks were able to “invest” in real estate bundles from Fannie and Freddie, because, you know, the goverment stands behind them, and will bail you out…once you become too big to fail.

By the time Bush43 started worring about the overexposure to risky investment by Fannie and Freddie, Barney Frank, when he wsn’t letting teenage prostitutes use his apartment for a brothel, said on camera in a hearing, “let’s roll the dice.” And they came up snake eyes.

There’s more, and rockmom could no doubt fill in the fine details.

Wethal on February 5, 2013 at 8:35 AM

nonsense. this is a convenient lie perpetuated by conservatives unwilling to face up to the fact that the policies they championed and the free market they so cherish have failed in such spectacular fashion. as i said, pathetic.

sesquipedalian on February 5, 2013 at 8:22 AM

Prime example of the clueless of liberals when it comes to economic matters.

Liberals and RINOs scratch their heads when capitalism seizes on opportunities created by politicians who insist on intervening in the marketplace.

There may have been a time when blacks and Hispanics were redlined out of mortgage loans, but that time is long past. If lending institutions hadn’t been either forced or induced by incentives to lend money to UNCREDITWORTHY borrowers, we’d have never seen the 2008 meltdown.

If you disagree, let’s go back to lending to people who don’t have the ability to pay a mortgage.

BuckeyeSam on February 5, 2013 at 8:36 AM

you think i’m stupid or what?

sesquipedalian on February 5, 2013 at 8:31 AM

I think I already answered that!

lol, nevermind

you’re dumb

Slade73 on February 5, 2013 at 8:23 AM

Slade73 on February 5, 2013 at 8:38 AM

you think i’m stupid or what?

sesquipedalian on February 5, 2013 at 8:31 AM

That’s too damn easy an opening to actually take.

Happy Nomad on February 5, 2013 at 8:38 AM

“Watch me pull a rabbit out of my hat.”

This move shouldn’t surprise anyone. This administration doesn’t have a clue. After all, they fear and attack Republicans as Enemy No. 1, while Al Qaeda regroups, rearms and blows up embassies.

They are pure political animals, and screw everything else.

fogw on February 5, 2013 at 8:40 AM

Ummm the housing market had been around for over 50 years before the bubble burst.

If you think the ever increasing govt regulations and GSEs into the market had nothing to do with it I have a bridge to sell you.

You DO realize I don’t have to directly interfere in the market, I can just bail everyone out every time they fail. You don’t think this influences behaviour?

I am sure its just a coinkydink in these peoples minds that govt spending has been 25% of GDP since Dear Leader took over and the economy is TANKING. Oh during those wonderful Gingrich/Clinton years: govt spending was 18% of GDP.

Math. Is. Hard.

DavidM on February 5, 2013 at 8:41 AM

If lending institutions hadn’t been either forced or induced by incentives to lend money to UNCREDITWORTHY borrowers

BuckeyeSam on February 5, 2013 at 8:36 AM

nonsense.

sesquipedalian on February 5, 2013 at 8:41 AM

Holder / Napolitano 2016 !

Cover all the bases with this combo, do it Dems.

A “real” black, a perfect successor philosophically to Obama. Advances the collapse of all but the Ruling classes in DC. And forces Americans to “cower” over all kinds of things. Napolitano would be perfect as she would bring in millions of women voters that are not threatened by a female candidate like Palin. Women voters love their female candidates butchy, frumpy and un-female, even angry. Perfect!!

And it’s an automatic winner because the gop will nominate another squish who is afraid to go after the Dems.

PappyD61 on February 5, 2013 at 8:42 AM

Fannie Freddie and the Fed will funnel 1 trillion dollars to S&P. S&P will enter a settlement for 500 billion….The DOJ has the headline they want…and the big banks get what they want(more money) and the American taxpayers get screwed….

DVPTexFla on February 5, 2013 at 8:21 AM

And the MSM will report it as “Although S&P admits no wrongdoing *wink, wink* they are still paying the government billiions in “compensation.”

And the lasting assumption the left wants to be made is that S&P paid because it was responsible, not because it wanted to settle to “buy peace.”

Wethal on February 5, 2013 at 8:42 AM

Sorry a sentence got deleted there. My second sentence should have been:

After 50-60 years the free market just mysteriously decided to fail? So all markets are good for 60 years or so then we need those oh-so–smart people in DC to take over and run them? You know they people who claim that every dollar in spending generates 1.30 in economic output? I guess Zimbabwe is doing it right then.

This is grasping at straws and isn’t objective thinking in the least.

DavidM on February 5, 2013 at 8:44 AM

Barney Frank should be in jail over this.

rbj on February 5, 2013 at 8:44 AM

In my mind, the timing of the “collapse” has always been suspect. Why, just at the time that W was getting ready to leave office, did the market suddenly go south? Buyers didn’t instantaneously run out of money and lenders were still hot to finance mortgages. The alleged collapse appeared to me to be fueled by Democrats who knew that shedding light on their Ponzi scheme, The Community Reinvestment Act and its calculated consequences, would be bad for re-election business unless they could somehow blame it on Republicans. Voila! One made-to-order mortgage collapse that very conveniently happened on W’s watch. Enter stage right, BHO rides to the rescue (only, we have yet to be rescued) and attends a WH crisis meeting in which John McCain beclowns himself and Teh One comes off looking like the smartest boy in the room. The cynical, disingenuous ploy seems to work for Democrats every time they try it. They know on which side their low information voters’ bread is buttered.

College Prof on February 5, 2013 at 8:44 AM

Perfect time for S&P to admit “you know, you’re right. We’ve put too shiny a spin on things. So, for the sake of honesty we’re no longer putting a shiny spin on 16 trillion in debt. So we are lowering US credit rating to junk status.”

JasperBallbaggins on February 5, 2013 at 8:44 AM

this just in: sesquipedalian says Clinton did not repeal Glass Steagall

revisionist history at its best

Slade73 on February 5, 2013 at 8:46 AM

Then we get to Bubba, who, when he wasn’t molesting women, expanded the CRA with the help of treasury secretary Robert Reich and HUD secretary…..Andrew Cuomo!

Sorry. Richard Rubin was treasury. Hard to keep the Clinton Crooks straight.

Wethal on February 5, 2013 at 8:50 AM

this post is a pathetic attempt to shift the blame solely onto fannie and freddie.

sesquipedalian on February 5, 2013 at 8:15 AM

Well, if I recall there was an effort by the Bush administration to tighten the oversight on of the risk in the ballooning mortgage portfolio of Fannie and Freddie. Although this effort passed committee it was filibustered in the full Senate (Chris Dodd was the point man on this). So, yes, if you compare the role of Fannie/Freddie versus S&P in this fiasco, it is quite reasonable to shift blame soley to Fannie/Freddie. I guess we could include the Senate but that would probably bring a lot of high ranking Democrats into this little blame circle and I don’t think you are comfortable with that either. Why you repeatedly draw attention to your thoughtless idiocy is stunning.

DaveDief on February 5, 2013 at 8:53 AM

CNBC’s on-air analysts just questioned why the DOJ isn’t going after Moody’s since the evidence against them is just as strong as the evidence against S&P.

Class, can you tell me why DOJ isn’t going after Moody’s?

Steve Eggleston on February 5, 2013 at 8:58 AM

Well, if I recall there was an effort by the Bush administration to tighten the oversight on of the risk in the ballooning mortgage portfolio of Fannie and Freddie.

DaveDief on February 5, 2013 at 8:53 AM

dude, f+f accounted for a fraction of the subprime mortgages issued in the 2000s.

y’all are arguing without any numbers to back you up. do recognize that “rush is always right” makes sense as an argument only inside your shrinking little bubble.

sesquipedalian on February 5, 2013 at 8:58 AM

this is a convenient lie perpetuated by conservatives unwilling to face up to the fact that the policies they championed and the free market they so cherish have failed in such spectacular fashion.

sesquipedalian on February 5, 2013 at 8:22 AM

It’s not a “free market” if the government is up to its elbows in it, manipulating market forces and instituting social engineering in place of sound fiscal policies.

The Schaef on February 5, 2013 at 9:04 AM

It’s not a “free market” if the government is up to its elbows in it, manipulating market forces and instituting social engineering in place of sound fiscal policies.

The Schaef on February 5, 2013 at 9:04 AM

it was not the cra’s fault.

why don’t you ever talk about the deregulation of the derivatives market and its subsequent explosion? (it’s a rhetorical question)

sesquipedalian on February 5, 2013 at 9:10 AM

hey im one of those who went into debt up to my eyeballs because S&P told me it was ok to do and i cant think for myself so leave my sugar daddy obama alone all you meanie people lol

sesquipedalian on February 5, 2013 at 8:15 AM

Indeed.

MNHawk on February 5, 2013 at 9:10 AM

Class, can you tell me why DOJ isn’t going after Moody’s?

Steve Eggleston on February 5, 2013 at 8:58 AM

Because Moody’s executives maybe bundled some donations for sleazy Democrats, perhaps?

MNHawk on February 5, 2013 at 9:12 AM

Certainly Holder will go after Bill Clinton for his role in the mortgage crisis, right? From TIME:

“In 1995 Clinton loosened housing rules by rewriting the Community Reinvestment Act, which put added pressure on banks to lend in low-income neighborhoods. He also signed the Commodity Futures Modernization Act, which exempted credit-default swaps from regulation.”

jediwebdude on February 5, 2013 at 9:14 AM

Ed, I think you’re wrong on this. You’re confusing the lending market, which the government pushed, with the securities market, which they didn’t.

The big brokerage houses took awful and risky loans and put them into big piles of investments called CDO’s. S&P (and Moody’s for that matter) simply did not do their homework on the CDO’s. They specifically forbade their employees from digging into the details to determine just how bad these securities were. Other investors who *did* do their homework realized what was going on, shorted them and made hundreds of millions. S&P was giving them AAA ratings when even a modicum of due diligence would have revealed that they were teetering piles of garbage.

S&P is not some government agency. They are paid by the big brokerage houses. And they didn’t want to rock the boat on the multi-trillion ride to Mars that the brokerage houses took and that, in the end, we all paid for. Fannie and Freddie did not create CDO’s and CDS’s. Investors created those. And S&P actively participated in inflating the bubble and made billions off of it. In a just world, they’d be completely bankrupted.

Hal_10000 on February 5, 2013 at 9:14 AM

Why what do you know

Barack Hussein Obama, Umm Umm Umm – $4,700
Mitt Romney – $775.

Although pretty low to buy the sleazy likes of Holder, who normally demands more. How much did Marc Rich buy Holder for again?

MNHawk on February 5, 2013 at 9:14 AM

dude, f+f accounted for a fraction of the subprime mortgages issued in the 2000s.

sesquipedalian on February 5, 2013 at 8:58 AM

It isn’t about them issuing the mortgages, Rockefeller. It’s about them buying them up, to keep risky loans from impacting the market too heavily, as part of the federal incentive to further increase home ownership.

They sucked up five TRILLION dollars worth of mortgages and bundled 70% of them into securities. How do you figure the impact of that on the housing market is null?

More to the point, if F&F can take all of this action and have zero effect on the housing market, why do those entities even exist in the first place? I thought Fannie Mae was shorthand for Federal National Mortgage Association, but according to you, I guess it’s the Federal Do Absolutely Nothing to Impact The Housing Market And Yet Still Cost Taxpayers 300 Billion Dollars Association.

The Schaef on February 5, 2013 at 9:17 AM

S & P should have hired former democrat governor and Obama fundraiser John Corzine, who, like Bernie Madoff, ‘lost’ billions of investors money, without little to no inquiry or outrage from Obama or his hypocritical fellow supporters and democrats.

Had S & P hired Obama’s buddy Corzine, the Obama administration and the Justice Department would have ignored them.

Cavalry on February 5, 2013 at 9:18 AM

why don’t you ever talk about the deregulation of the derivatives market

sesquipedalian on February 5, 2013 at 9:10 AM

Because a). that’s your red herring on the issue, and b). you can’t talk about that and still disassociate the GSEs from the crisis, since they were in it for trillions of dollars.

The Schaef on February 5, 2013 at 9:19 AM

No one went to jail during this government created fiasco. The fault lies at the feet of the progressives that created policy and environment in which financial institutions were coerced into making loans to people who shouldn’t have qualified. All under the auspices of fairness and progressive garbage thought. The whole lot of the in Fanny and Freddy and some in the justice department and even some in the banking sector that went alone with this bs . It is criminal what progressives have done.

tom daschle concerned on February 5, 2013 at 9:22 AM

dude, f+f accounted for a fraction of the subprime mortgages issued in the 2000s.

y’all are arguing without any numbers to back you up. do recognize that “rush is always right” makes sense as an argument only inside your shrinking little bubble.

You still haven’t answered WHY it collapsed when it did.

Did the universe simply decide that free markets and liberty had run their course? Maybe the market got too free or something huh?

And the percentage it counted for means NOTHING. If you have someone ready to bail you out should your investments go south, then you will invest with reckless abandon.

DavidM on February 5, 2013 at 9:31 AM

it was not the cra’s fault.

why don’t you ever talk about the deregulation of the derivatives market and its subsequent explosion? (it’s a rhetorical question)

sesquipedalian on February 5, 2013 at 9:10 AM

Nonsense yourself.

Who cares about derivatives when it’s the underlying securities that the problem? Thanks to liberals and RINOs for intervening in the housing market.

Simple answer: rent if you can’t afford to buy a home.

BuckeyeSam on February 5, 2013 at 9:32 AM

It’s amazing that anyone wonders why so many are fearful of this administration. When it doesn’t get its way or is rightfully criticized, it bullies it’s opponent by either filing expensive lawsuits until they submit or they use the various federal agencies such as the IRS or EPA to beat down their adversary.

S&P is only doing its job. If it is a crime to that, then this country has sunk so low that a recovery will be virtually impossible.

iamsaved on February 5, 2013 at 9:44 AM

S&P is not some government agency. They are paid by the big brokerage houses. And they didn’t want to rock the boat on the multi-trillion ride to Mars that the brokerage houses took and that, in the end, we all paid for. Fannie and Freddie did not create CDO’s and CDS’s. Investors created those. And S&P actively participated in inflating the bubble and made billions off of it.

Hal_10000 on February 5, 2013 at 9:14 AM

according to ed and commenters here, none of this happened, and even if it happened it doesn’t matter. (and if it happened and caused the crisis, it’s obviously the government’s fault because acorn.)

sesquipedalian on February 5, 2013 at 9:45 AM

Excellent, liberals fighting liberals… Our side should learn not to feel any compassion to Wall Street and any company related to Wall Street because they are totally controlled by the Limousine Liberals the biggest enemy of Conservatism… On this particular subject of the Wall Street rating agencies just remember that they are threatening to downgrade the US bonds if WE DO NOT BORROW MORE MONEY AND GET MORE IN DEBT…. This folks is the enemy of conservatism….

mnjg on February 5, 2013 at 9:47 AM

according to ed and commenters here, none of this happened, and even if it happened it doesn’t matter. (and if it happened and caused the crisis, it’s obviously the government’s fault because acorn.)

sesquipedalian on February 5, 2013 at 9:45 AM

You are too stupid communist scum to understand that Wall Street and companies related to them including the rating agencies are totally controlled by Limousine Liberals… So what we are seeing here is liberals fighting liberlas and I cannot be more happier…

mnjg on February 5, 2013 at 9:49 AM

S&P is only doing its job. If it is a crime to that, then this country has sunk so low that a recovery will be virtually impossible.

iamsaved on February 5, 2013 at 9:44 AM

this is what happens when your only source of information are radio gasbags, ballet critics and blogger-propagandists.

sesquipedalian on February 5, 2013 at 9:49 AM

You are too stupid communist scum to understand that Wall Street and companies related to them including the rating agencies are totally controlled by Limousine Liberals… So what we are seeing here is liberals fighting liberlas and I cannot be more happier…

mnjg on February 5, 2013 at 9:49 AM

acorn did it.

sesquipedalian on February 5, 2013 at 9:53 AM

this just in: sesquipedalian says Clinton did not repeal Glass Steagall

revisionist history at its best

Slade73 on February 5, 2013 at 8:46 AM

Not revisionist history yet. But well on its way. You see, sequireptilian and other shrill trolls simply repeat the same lies over and over again until the stupid dumb greedy people that support their agenda believes them.

Recent examples where Dem/leftist lies have trumped the truth:

- GWB declared the war in Afghanistan was over with that “mission accomplished” banner.

- Sarah Palin said she could see Russia from her backyard.

- Fannie and Freddie (conversely Dodd/Frank) have been scapegoated into blame for the housing bubble crisis. It is really those evil lenders that caused all the foreclosures and not the CRA or greedy stupid people.

I could give countless other examples but you get the idea. The truth doesn’t matter to these people because they are nothing but worthless parasites who contribute nothing to society. Sequireptilian could disappear from the face of the earth tommorrow and it wouldn’t matter because he/she/it has no intrinsic value and contributes nothing to the common good. Just another worthless and lazy parasite taking from the producers, demanding even more, and doing nothing for he/she/it’s fellow human beings.

Happy Nomad on February 5, 2013 at 9:55 AM

according to ed and commenters here, none of this happened, and even if it happened it doesn’t matter. (and if it happened and caused the crisis, it’s obviously the government’s fault because acorn.)
sesquipedalian on February 5, 2013 at 9:45 AM

No one is denying that some private institutions failed or that some financial institutions were greedy or even corrupt but you’re still left with the fact – clearly pointed out by others here – that this house of cards was made possible and spurred on by government intervention. These institutions were acting rationally given the market engineered by the government.

gwelf on February 5, 2013 at 10:03 AM

I see the desperate Obama troll needs to be smacked down with real facts again.

Since the troll sesqui won’t read, let’s summarize the main points for it.

Page 3
Fannie Mae and Freddie Mac fund the purchase of mortgages they securitize by selling the resulting MBSs to investors in the capital markets. An investor who buys a mortgage-backed security guaranteed by one of the GSEs will be paid the principal and any interest that is due even if borrowers default on the underlying loans.

Page 22

Fannie Mae and Freddie Mac were rewarded for taking risks because the riskiness of their operations had little effect on their credit costs and their access to the market. When times were good, the GSEs’ stakeholders received the gains in the form of higher profits on riskier investments, but when times were bad, taxpayers were left with the losses.

Page 23 – 24

Their charters require Fannie Mae and Freddie Mac to provide ongoing assistance to the secondary mortgage market and to promote access to mortgage credit throughout the nation, including for low- and moderateincome families and residents of central cities. Subsequent legislation, the 1992 Federal Housing Enterprises and Financial Safety and Soundness Act, required the Department of Housing and Urban Development (HUD) to establish affordable-housing goals expressed in percentages of total housing units financed by Fannie Mae and Freddie Mac.

Since then, regulators have set annual targets for all mortgages and, beginning in 2005, separate goals for home purchases (as opposed to refinanced loans). Those goals apply to low- and moderate-income families (defined as those with income at or below an area’s median income), families who have very low income (no more than 60 percent of the area median), and underserved areas (generally census tracts with large percentages of low-income people or minorities). Since 2001, slightly more than half of the loans purchased or guaranteed by the GSEs have counted toward those goals. Regulators have also set targets for mortgages on affordable multifamily rental housing, expressed in fixed dollar volumes for low-income renters overall and for low-income renters living in poor neighborhoods. In pursuit of those targets, Fannie Mae and Freddie Mac purchase mortgages on multifamily rental properties—which account for about 10 percent of the housing units they finance—and issue multifamilyhousing MBSs.

You lose, liar sesqui. The facts destroy your Obama whoring again.

northdallasthirty on February 5, 2013 at 10:05 AM

acorn did it.

sesquipedalian on February 5, 2013 at 9:53 AM

Low IQ communist scum and slave of the State… Limousine Liberals who control Wall Street and Government liberals who want the banks to give mortgage loans for people who cannot afford them did it…

mnjg on February 5, 2013 at 10:06 AM

Meanwhile, let”s not forget how the Obama Party and Barack Obama himself screamed that the GSEs needed NO oversight and should actually be told to “roll the dice”. on riskier loans.

Think the Obama whore sesqui can answer that one? Of course not.

northdallasthirty on February 5, 2013 at 10:11 AM

- Sarah Palin said she could see Russia from her backyard.

it still hurts, doesn’t it? if i were you, i’d be so embarrassed about ever supporting snowflake snooki that i’d avoid mentioning her at all. bloviating radio talkers and trainwreck reality tv celebs, those are your thought leaders.

Sequireptilian could disappear from the face of the earth tommorrow and it wouldn’t matter because he/she/it has no intrinsic value and contributes nothing to the common good. Just another worthless and lazy parasite taking from the producers, demanding even more, and doing nothing for he/she/it’s fellow human beings.

Happy Nomad on February 5, 2013 at 9:55 AM

you’re one of my favorites among all the fascist imbeciles here who want to eradicate me and “my ilk.” i don’t even have to lift a finger to discredit you because you’re doing it yourselves.

sesquipedalian on February 5, 2013 at 10:13 AM

For anyone with a subscription to S&P, Fitch, and Moody’s (on Bloomberg or otherwise): go look up 10 issuers or securities. You’ll notice just about every S&P rating is duplicated by Fitch, but Moody’s ratings are slightly different. This has been the case for years. Further, look at the ratings history of a few issuers. You’ll notice that an upgrade/downgrade/credit watch by S&P is almost always followed by Fitch within days.

Question: If the DOJ is going to sue S&P, why not sue Fitch as well? After all, their ratings are virtually identical.

Answer: Fitch had the (political) wisdom to stop short of downgraded U.S. sovereign debt.

steebo77 on February 5, 2013 at 10:13 AM

Meanwhile, let”s not forget how the Obama Party and Barack Obama himself screamed that the GSEs needed NO oversight and should actually be told to “roll the dice”. on riskier loans.

Think the Obama whore sesqui can answer that one? Of course not.

northdallasthirty on February 5, 2013 at 10:11 AM

Well Obama was a lawyer for ACORN so….

ACORN!!!1!1!!!eleventy!1!11!!!11!

gwelf on February 5, 2013 at 10:15 AM

Derivatives should be deregulated. That wasn’t the problem.

says who? care to back up the assertion, or would you rather wipe the ominous excrement marks off it first?

Blaming derivative deregulation for the housing bubble is like blaming free speech for criticism of Obama.

blink on February 5, 2013 at 10:10 AM

blaming derivative deregulation for the derivative bubble, on the other hand, makes a ton of sense.

sesquipedalian on February 5, 2013 at 10:16 AM

It was Congressional intervention, not S&P, that fueled the irrational demand on both sides of the lending markets. People bought houses they couldn’t afford, took out home equity loans on equity that never really existed, and lenders shoved money into the hands of people who couldn’t even establish that they had an income (remember No Income Verification-No Down loans?).

You don’t have a clue Ed…

Fraudulent securitization was the heart of the crisis. Lenders don’t make loans they cannot sell. Fraudulent securitization allowed for those loans to be sold in numbers that brought down the global economy. The rating agencies played a key role in the securitization process by approving the fraudulent AAA labels.

If the lenders couldn’t sell off the loans (securitization) then the money would never have been available for homeowners to hang themselves. And the money would not have existed to inflate prices. It all starts with securitization. Everything else is a consequence of that.

voiceofreason on February 5, 2013 at 10:17 AM

it still hurts, doesn’t it? if i were you, i’d be so embarrassed about ever supporting snowflake snooki that i’d avoid mentioning her at all. bloviating radio talkers and trainwreck reality tv celebs, those are your thought leaders.
sesquipedalian on February 5, 2013 at 10:13 AM

I was told that if I voted for McCain we’d have a complete idiot as VP. And they were right.

gwelf on February 5, 2013 at 10:19 AM

Conservatives need to stop reflexively taking offense at government action against corporate crooks at all levels……including these rating services.

rickyricardo on February 5, 2013 at 8:18 AM

And leftists need to stop reflexively taking offense at any reminder of democRAT theft and general incompetence…including fanny and freddie.
Ride that moral high horse someplace else, bub. It gets no traction here.

Solaratov on February 5, 2013 at 10:24 AM

I hope S&P kept a record of all the threats, bribes and arm-twisting they were subjected to.

mojo on February 5, 2013 at 10:25 AM

Fraudulent securitization was the heart of the crisis. Lenders don’t make loans they cannot sell. Fraudulent securitization allowed for those loans to be sold in numbers that brought down the global economy. The rating agencies played a key role in the securitization process by approving the fraudulent AAA labels.

voiceofreason on February 5, 2013 at 10:17 AM

Yes, but the lenders were forced into making those loans by the government, using the guise of “fairness”. However, those loans were made with the understanding that there would be a ready buyer in the GSEs (government-sponsored enterprises – i.e., FNMA, FHLMC, FHLB). If the government hadn’t been ready to buy those stupid loans, most of them never would have issued.

Blaming only the lenders and the NRSROs (nationally-recognized statistical rating organizations – i.e., S&P, Moody’s, Fitch) is fundamentally dishonest and ignores the deeper roots of the housing crisis.

steebo77 on February 5, 2013 at 10:25 AM

You don’t have a clue Ed…

Fraudulent securitization was the heart of the crisis. Lenders don’t make loans they cannot sell. Fraudulent securitization allowed for those loans to be sold in numbers that brought down the global economy. The rating agencies played a key role in the securitization process by approving the fraudulent AAA labels.

If the lenders couldn’t sell off the loans (securitization) then the money would never have been available for homeowners to hang themselves. And the money would not have existed to inflate prices. It all starts with securitization. Everything else is a consequence of that.

voiceofreason on February 5, 2013 at 10:17 AM

This is what happened but you’re wrong that this was at the heart of it. Securitization was the way for lending institutions to facilitate the governments policy. The government was pushing and threatening these institutions to make loans to people who could not pay them back. So of course they found a way to make a profit off of it. And F+F were the brokers who took most of these bad loans off the lenders hands and fueled the securitization.

The truth is that if the government hadn’t deformed the market around trying to push home ownership on people who couldn’t afford it (and knew they couldn’t) then the bubble/crash wouldn’t have happened. At the end of the day the lending institutions were following the public policy championed by Dodd/Frank (and others) and facilitated by F+F.

gwelf on February 5, 2013 at 10:25 AM

Fraudulent securitization was the heart of the crisis. Lenders don’t make loans they cannot sell. Fraudulent securitization allowed for those loans to be sold in numbers that brought down the global economy. The rating agencies played a key role in the securitization process by approving the fraudulent AAA labels.
If the lenders couldn’t sell off the loans (securitization) then the money would never have been available for homeowners to hang themselves. And the money would not have existed to inflate prices. It all starts with securitization. Everything else is a consequence of that.

voiceofreason on February 5, 2013 at 10:17 AM

Lol.

Are you aware who the primary issuers of mortgage-backed securities are and were?

northdallasthirty on February 5, 2013 at 10:26 AM

No one is denying that some private institutions failed or that some financial institutions were greedy or even corrupt but you’re still left with the fact – clearly pointed out by others here – that this house of cards was made possible and spurred on by government intervention.

And it was the job of Moody’s and S&P to point out what a pile of garbage had been built by this. They failed to do so because they and everyone else were making so much money off of it. Honestly, you can walk and chew gum at the same time. You can castigate the government for inflating the housing bubble while castigating the people who made billions off of it too.

Hal_10000 on February 5, 2013 at 10:27 AM

blaming derivative deregulation for the derivative bubble, on the other hand, makes a ton of sense.

sesquipedalian on February 5, 2013 at 10:16 AM

Blaming government intervention into the housing and debt markets, which introduced exponentially greater risk into the financial markets, which led to a greater need to hedge positions via use of derivatives, makes a ton of sense.

steebo77 on February 5, 2013 at 10:28 AM

Kinda torn on this one. S&P played ball with liberal policies instead of growing a set and yelling a warning.

Ya lay down with dogs, you’re gonna get fleas.

Exit question: When are the likes of Barney Frank and Maxine Waters going to be in the dock?

GarandFan on February 5, 2013 at 10:29 AM

you’re one of my favorites among all the fascist imbeciles here who want to eradicate me and “my ilk.”

sesquipedalian on February 5, 2013 at 10:13 AM

Nah. You and yours are going to do it to yourselves. Soon enough, your ‘pets’ in the ghettos and the barrios will turn on you because the handouts and “free stuff” will have to slow down and be cut off.

Your end will not be pretty…but it will be funny.

Solaratov on February 5, 2013 at 10:29 AM

Lol.

Are you aware who the primary issuers of mortgage-backed securities are and were?

northdallasthirty on February 5, 2013 at 10:26 AM

Did you see that the link in his handle leads to some “Mortgage Guy’s Blog” website? Yet he seems totally unaware of GNMA, FNMA, FHLMC, FHLB.

steebo77 on February 5, 2013 at 10:30 AM

Are you aware who the primary issuers of mortgage-backed securities are and were?

Mortgage securities, which S&P rated correctly. Not the CDS’s and CDO’s that the big brokerages created that hid their lack of value and that S&P gave AAA ratings to.

Hal_10000 on February 5, 2013 at 10:30 AM

And it was the job of Moody’s and S&P to point out what a pile of garbage had been built by this. They failed to do so because they and everyone else were making so much money off of it. Honestly, you can walk and chew gum at the same time. You can castigate the government for inflating the housing bubble while castigating the people who made billions off of it too.

Hal_10000 on February 5, 2013 at 10:27 AM

Who’s letting them off of the hook? Yeah they failed. There were perverse incentives. But the root of the problem is still the government intrusion into the market.

There’s also all the people who took out loans they knew they couldn’t afford.

There’s blame to go around at all levels of this fiasco.

It’s better to focus on the root of the problem – especially when liberals are running around saying that the government had nothing to do with it (and the irony that Frank/Dodd who championed the underlying cause of the bubble/crash are also credited by liberals with it’s future solution in the Frank/Dodd Act).

gwelf on February 5, 2013 at 10:33 AM

Your end will not be pretty…but it will be funny.

Solaratov on February 5, 2013 at 10:29 AM

dream on, benito.

sesquipedalian on February 5, 2013 at 10:35 AM

Mortgage securities, which S&P rated correctly.

Hal_10000 on February 5, 2013 at 10:30 AM

Yeah, because they more or less had the full faith and credit of the United States backing them. If borrowers defaulted on the underlying mortgages, it was nothing a Treasury bailout couldn’t fix.

steebo77 on February 5, 2013 at 10:37 AM

Look at all these bankster shills scapegoating homeowners and minorities for the financial crisis.

Pathetic.

Federal Reserve Board data show that:

- More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.
- Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.
- Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law [Community Reinvestment Act] that’s being lambasted by conservative critics.

Hell, that’s not even mentioning the fact that CRA LOANS PERFORMED BETTER THAN NON-CRA LOANS.

Right-wingers just love class warfare when it’s the rich waging war on the poor and working class. When the people fight back against the banks and other genuine parasites then wingnuts get worried.

AJB on February 5, 2013 at 10:38 AM

And S&P actively participated in inflating the bubble and made billions off of it. In a just world, they’d be completely bankrupted.

Hal_10000 on February 5, 2013 at 9:14 AM

Why didn’t they go bankrupt?
Why are their ratings still relevant (given their massive failure)?

Could it be:

S&P and other rating agencies may have erred in rating these bonds as highly as they did, but the Congressional intervention behind the GSE-issued MBSs left everyone with the very distinct impression that the government would stand behind these bonds. And guess what? They were correct. In the end, Congress bailed out Fannie and Freddie.

-Ed Morrissey

gwelf on February 5, 2013 at 10:39 AM

Right-wingers just love class warfare when it’s the rich waging war on the poor and working class. When the people fight back against the banks and other genuine parasites then wingnuts get worried.

AJB on February 5, 2013 at 10:38 AM

I don’t think you’ve been paying very close attention.

We know that most of the loans were ISSUED by private institutions but they were immediately SOLD to F+F who then securitized them.

The liberal policy was to force lending institutions to give out loans regardless of ability to pay and F+F gave these lenders a way out of going bankrupt. You want to talk about class warfare? This was a government attempt at one of the largest transfers of wealth in history to the poor and lower middle-class that failed miserably.

gwelf on February 5, 2013 at 10:44 AM

AJB on February 5, 2013 at 10:38 AM

The CRA is just one component of the pressure applied to private lenders by the government to make questionable loans. Also worth noting that not all pressure came from the Feds. State governments also played a role.

And, yes, you’re right that there were private lenders who got into the game just to make money off the bubble. But they largely did so after the bubble was already being inflated. And the bubble was being inflated as a result of, among other things, government intervention and the Federal Reserve’s extended low-interest rate policy. These private lenders just added gasoline to a fire already set by D.C. technocrats.

Funny that you should decry class warfare while simultaneously using the word “bankster.”

steebo77 on February 5, 2013 at 10:50 AM

AJB on February 5, 2013 at 10:38 AM

Low IQ communist scum… Almost all the mortgage loans subprime or not made by privates banks (who are mainly controlled by Limousine Liberals) were sold within a month to Fannie Mae and Freddie Mac the two government agencies created by Liberals… The same crap still continue today…

mnjg on February 5, 2013 at 10:53 AM

AJB on February 5, 2013 at 10:38 AM

Also, of the subprime loans made by private lenders, how many of them were issued by companies subsequently acquired by other private lenders but financed by bailout funds from the U.S. taxpayer? A heck of a lot. The expectation of bailouts definitely influenced behavior – negatively for the markets and the broader economy, but definitely in line with government policies and objectives. Not only would the GSEs directly purchase loans, the Treasury would bail you out or finance your purchase by another firm, all in the name of More Housing for Everyone!!! Pretty sweet, huh?

steebo77 on February 5, 2013 at 11:02 AM

steebo77 on February 5, 2013 at 10:25 AM

The banks can’t lend if they can’t sell the loans. Let that sink in.

In my 13 years owning and running a mortgage company, the government never forced me to make a loan to anyone.

voiceofreason on February 5, 2013 at 11:05 AM

In my 13 years owning and running a mortgage company, the government never forced me to make a loan to anyone.

voiceofreason on February 5, 2013 at 11:05 AM

And what kinds of loans were you making?

steebo77 on February 5, 2013 at 11:09 AM

steebo77 on February 5, 2013 at 11:09 AM

Fannie and Freddie down to foreclosure bailouts. Or put another way, AAA to DDD and everything in between.

voiceofreason on February 5, 2013 at 11:18 AM

Fannie and Freddie down to foreclosure bailouts. Or put another way, AAA to DDD and everything in between.

voiceofreason on February 5, 2013 at 11:18 AM

About what percentage of them were conforming loans?

steebo77 on February 5, 2013 at 11:19 AM

At any given time, a third to half.

voiceofreason on February 5, 2013 at 11:21 AM

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