Better Late than Never? U.S. Sues S&P over Bond Ratings Prior to Financial Crisis

  • Posted on: 9 December 2015
  • By: admin

Better Late than Never? U.S. Sues S&P over Bond Ratings Prior to Financial Crisis

After nearly five years, the U.S. Justice Department is filing a lawsuit against Standard & Poor’s over S&P’s ratings of mortgage bonds prior to the financial crisis of 2008. You can read the Reuters article at http://www.reuters.com/article/2013/02/05/mcgrawhill-sandp-civilcharges-idUSL1N0B495Q20130205

Why You Should Care

This may be a case of too little too late, but it is long overdue. There are so many culpable parties when it comes to the negligence surrounding the explosion of the mortgage bond market, but ratings agencies, like S&P, that seemingly just slapped AAA ratings on what turned out to be pools of subprime, and ultimately worthless, mortgages were a major factor in allowing these toxic instruments to infiltrate and infect the broader financial system. 

The case brought by the Justice Department is a civil case, which means unfortunately no jail time in the event that the U.S. wins. It’s almost laughable that a single person who was involved in the creation, rating, sale, and service of these toxic products has yet to go to jail. But hey, if we can’t even go after Jon Corzine, why would we ever expect to be able to go after the people that caused one of the worst crises and recessions in history?