As anticipated, the Department of Justice is now suing S&P over its alleged contribution to the mortgage crisis.
The details surrounding the mortgage debacle has been well chronicled in previous posts. While it’s obvious that S&P’s risk assessment models were flawed, there is no evidence to suggest that the rating agency deliberately misled anyone. The real issue is is political, and the point here is to establish corporate America–not Washington–as the villain, and send a message to anyone who might challenge governmental authority. Unfortunately, S&P will probably negotiate a settlement rather than fight, which will further underscore the threat.
If the DoJ is going to due S&P, there are some other culprits Eric Holder could consider as well…
1. Congress–for passing the Community Reinvestment Act.
2. Freddie & Fannie–for exacerbating the subprime problem.
3. Barney Frank and Chris Dodd–for misrepresenting the financial integrity of Freddie & Fannie.
4. Obama–for expanding the national debt at an unprecedented pace.
5. The Fed–for instigating the entire problem from the outset by, among other things, pushing people into houses and bigger houses by keeping mortgage rates artificially low.