Monday, September 26, 2011

STANDARD & POOR: Need to be punished...

Sign of a mortgage centre in East LondonImage via Wikipedia
Just wanted to re-visited a previous topic and that is the Standard & Poor’s downgrading of U.S. credit.

At the time I said that they had ulterior motives for doing that because they don’t get paid for doing that, it does not mean shit to the world economy (US still the safest place to put your money) and no other rating agency followed their lead.

What they knew was coming down the pike was a government investigation into their rating of toxic assets sometimes known as CDOs or collateralized debt offerings.

If you remember, these financial instruments are what brought our housing and banking industry down. People were granted mortgages for no valid reasons by mortgage brokers that would turn around and sell the mortgages after making a handsome commission, to others who collected those mortgages and wrapped them up into CDOs and sold it to investors.

This would work fine if everyone paid their mortgage on time and paid those mortgages off in time but because the people paying those mortgages should not have received those mortgages in the first place because they were not qualified financially to obtain a mortgage, those CDOs collapsed.

Now Standard & Poor rate financial instruments such as CDOs as to their credit worthiness, i.e. are they a safe investment or not. Well Standard & Poor rated those toxic assets as investment grade which prompted many to invest, taking their word for it.

Well Standard & Poor gets paid by the people trying to sell those toxic assets so obviously, they are not going to rate them un-buyable and here is where we have a problem with conflict of interest.

I feel that Standard & Poor should be in jail for what they did to the country because if they did their due diligence (did their job) we would not be in as big a mess as we are.

S&P downgraded the US economy so they then can use the word revenge when the US SEC goes after them with civil legal charges, seeking whatever they can get from them and then shutting them down. McGraw-Hill Co., which own S&P has already split from them to protect their core business.

Somebody on Wall Street needs to start paying for what happened and S&P, the arrogant little bastards, is a great place to start.

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