Here is Bloomberg’s take
… Why is the Justice Department suing Standard & Poor’s for mis-rating structured credit securities before the financial crisis, and not suing Moody’s, which gave a lot of the same products the same ratings? I have a theory,1 but Standard & Poor’s has another theory, and theirs is a corker:
The most obvious explanation is apparent. S&P alone among the major rating agencies downgraded the securities issued by the United States. As described below, the chronology of events relating to the downgrade and the commencement of this lawsuit provides powerful evidence linking the two. And beyond this showing, S&P submits with this motion the affidavit of the Chairman and, in August 2011, Chief Executive Officer and President of McGraw Hill, Harold McGraw III. Mr. McGraw describes personal communications made to him first on behalf of the Secretary of the Treasury, and then personally by the Secretary himself in the days following the downgrade. The Treasury Secretary angrily chastised S&P for the downgrade, stating that S&P’s conduct would be “looked at very carefully” and that such behavior could not occur without a response from the United States.
Well! I mean, lots of people have had that theory. I would link to some of them, but S&P’s motion that I just quoted comes with a helpful chronology of all the publications that have hinted at that theory, so you can just read that.2
Another story from Reuters
(Reuters) – Standard & Poor’s said on Tuesday the U.S. government filed a $5 billion fraud lawsuit against it in “retaliation” for its 2011 decision to strip the country of its “AAA” credit rating.
The McGraw Hill Financial Inc (MHFI.N) unit was the only major credit rating agency to take away the United States’ top rating, and the only one sued by the U.S. Department of Justice for allegedly misleading banks and credit unions about the credibility of its ratings prior to the 2008 financial crisis.
In a filing with the U.S. District Court in Santa Ana, California, S&P said the lawsuit filed on February 4 attempts to punish it for exercising its First Amendment free speech rights under the U.S. Constitution, but also seeks “excessive fines” in violation of the Eighth Amendment.
It said the government’s “impermissibly selective, punitive and meritless” lawsuit was brought “in retaliation for defendants’ exercise of their free speech rights with respect to the creditworthiness of the United States of America.”
(top photo via DonkeyHotey )