Eric Holder Holds One Half Of US Rating Agencies Accountable For Financial Crisis
We urge readers to do a word search for "Moody's" in the official department of justice release below. Here are the highlights:
- DOJ COMPLAINT ALLEGES S&P LIED ABOUT ITS OBJECTIVITY - when it downgraded the US?
- HOLDER SAYS S&P'S ACTIONS CAUSED `BILLIONS' IN LOSSES - did Moody's actions, profiled previously here, which happens to be a major holding of one Warren Buffett, cause billions in profits?
- HOLDER SAYS `NO CONNECTION' BETWEEN S&P SUIT, U.S. DOWNGRADE - just brilliant
Pure pathetic political posturing, because it was the rating agencies, whose complicity and conflicts of interest everyone knew about, who were responsible for the financial crisis. Not Alan Greenspan, not Ben Bernanke, and certainly not Wall Street which made tens of billions in profits selling CDOs to idiots in Europe and Asia. Of course, the US consumer who had a gun held against their head when they were buying McMansions with no money down and no future cash flow is not even mentioned.
Full release from the US Depratment of Promoting Injustice for kleptocrat bankers
Department of Justice Sues Standard & Poor’s for Fraud in Rating Mortgage-backed Securities in the Years Leading up to the Financial Crisis
Complaint Alleges that S&P Lied About its Objectivity and Independence And Issued Inflated Ratings for Certain Structured Debt Securities.
Attorney General Eric Holder announced today that the Department of Justice has filed a civil lawsuit against the credit rating agency Standard & Poor’s Ratings Services alleging that S&P engaged in a scheme to defraud investors in structured financial products known as Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs). The lawsuit alleges that investors, many of them federally insured financial institutions, lost billions of dollars on CDOs for which S&P issued inflated ratings that misrepresented the securities’ true credit risks. The complaint also alleges that S&P falsely represented that its ratings were objective, independent, and uninfluenced by S&P’s relationships with investment banks when, in actuality, S&P’s desire for increased revenue and market share led it to favor the interests of these banks over investors.
“Put simply, this alleged conduct is egregious – and it goes to the very heart of the recent financial crisis,” said Attorney General Holder. “Today’s action is an important step forward in our ongoing efforts to investigate – and – punish the conduct that is believed to have contributed to the worst economic crisis in recent history. It is just the latest example of the critical work that the President’s Financial Fraud Enforcement Task Force is making possible.”
Attorney General Eric Holder was joined in announcing the filing of the civil complaint by Acting Associate Attorney General Tony West, Principal Deputy Assistant Attorney General for the Civil Division Stuart F. Delery, and U.S. Attorney for the Central District of California André Birotte Jr. Also joining the Department of Justice in making this announcement were the attorneys general from California, Connecticut, Delaware, the District of Columbia, Illinois, Iowa and Mississippi, who have filed or will file civil fraud lawsuits against S&P alleging similar misconduct in the rating of structured financial products. Additional state attorneys general are expected to make similar filings today.
“Many investors, financial analysts and the general public expected S&P to be a fair and impartial umpire in issuing credit ratings, but the evidence we have uncovered tells a different story,” said Acting Associate Attorney General West. “Our investigation revealed that, despite their representations to the contrary, S&P’s concerns about market share, revenues and profits drove them to issue inflated ratings, thereby misleading the public and defrauding investors. In so doing, we believe that S&P played an important role in helping to bring our economy to the brink of collapse.”
Today’s action was filed in the Central District of California, home to the now defunct Western Federal Corporate Credit Union (WesCorp), which was the largest corporate credit union in the country. Following the 2008 financial crisis, WesCorp collapsed after suffering massive losses on RMBS and CDOs rated by S&P.
“Significant harm was caused by S&P’s alleged conduct in the Central District of California,” said U.S. Attorney for the Central District of California Birotte. “Across the seven counties in my district, we had huge numbers of homeowners who took out subprime mortgage loans, many of which were made by some of the country’s most aggressive lenders only because they later could be securitized into debt instruments that were given flawed ‘AAA’ ratings by S&P. This led to an untold number of foreclosures in my district. In addition, institutional investors located in my district, such as WesCorp, suffered massive losses after putting billions of dollars into RMBS and CDOs that received flawed and inflated ratings from S&P.”
The complaint, which names McGraw-Hill Companies, Inc. and its subsidiary, Standard & Poor’s Financial Services LLC (collectively S&P) as defendants, seeks civil penalties under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) based on three forms of alleged fraud by S&P: (1) mail fraud affecting federally insured financial institutions in violation of 18 U.S.C. § 1341; (2) wire fraud affecting federally insured financial institutions in violation of 18 U.S.C. § 1343; and (3) financial institution fraud in violation of 18 U.S.C. § 1344. FIRREA authorizes the Attorney General to seek civil penalties up to the amount of the losses suffered as a result of the alleged violations. To date, the government has identified more than $5 billion in losses suffered by federally insured financial institutions in connection with the failure of CDOs rated by S&P from March to October 2007.
“The fraud underpinning the crisis took many different forms, and for that reason, so must our response,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Department’s Civil Division. “As today’s filing demonstrates, the Department of Justice is committed to using every available legal tool to bring to justice those responsible for the financial crisis.”
According to the complaint, S&P publicly represented that its ratings of RMBS and CDOs were objective, independent and uninfluenced by the potential conflict of interest posed by S&P being selected to rate securities by the investment banks that sold those securities. Contrary to these representations, from 2004 to 2007, the government alleges, S&P was so concerned with the possibility of losing market share and profits that it limited, adjusted and delayed updates to the ratings criteria and analytical models it used to assess the credit risks posed by RMBS and CDOs. According to the complaint, S&P weakened those criteria and models from what S&P’s own analysts believed was necessary to make them more accurate. The complaint also alleges that, from at least March to October 2007, and because of this same desire to increase market share and profits, S&P issued inflated ratings on hundreds of billions of dollars’ worth of CDOs. At the time, according to the allegations in the complaint, S&P knew that the quality of non-prime RMBS was severely impaired, and that the ratings on those mortgage bonds would not hold. The government alleges that S&P failed to account for this impairment in the CDO ratings it was assigning on a daily basis. As a result, nearly every CDO rated by S&P during this time period failed, causing investors to lose billions of dollars.
The underlying federal investigation, code-named “Alchemy,” that led to the filing of this complaint was initiated in November 2009 in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. attorneys’ offices and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov .
Due to public interest in this case, the Department of Justice is releasing documents that may not be in an accessible format. If you have a disability and the format of any material on the site interferes with your ability to access some information, please email the Department of Justice webmaster at webmaster@usdoj.gov or contact Adora Andy at 202.514.2007. To enable us to respond in a manner that will be of most help to you, please indicate the nature of the accessibility problem, your preferred format (electronic format (ASCII, etc.), standard print, large print, etc.), the web address of the requested material, and your full contact information so we can reach you if questions arise while fulfilling your request.
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expect US downgrade in 3...2....1...
I think this preemptive attack on S&P is an attempt to discredit them (even more) before they inevitably downgrade the U.S. again with the infinite debt ceiling and infinite spending.
"These are not the droids you are looking for. Damn, it worked for OB1." - Eric Holder
Too bad that motherfucker looks like Lando instead.
Here's my new rallying cry, "Free Sean Egan!!!"
And could Holder just think of looking at the Corzine case? No no no, that decision isn't political.
Fuck me running. I need to get out of this corrupt banana republic. Shit, there aren't even bananas here. What's the fucking point then? Somebody should write a song about having no bananas today...somebody....
Leave Eric Holder alone! As the head of a major Mexican drug cartel I can say that he has done wonders for my business and brought me and my employees numerous benefits thanks the the generosity of the Fast and Furious program. He is truly a hero.
Life here in Bizarro World is so fun.
so markvochainey is actually Eric Holder? They have the same characteristics, running drugs and not running guns. No no no, not us. That was a "sting" operation. Trust us.
Oddly appropiate considering we live in bizarro world and in line with theme of having no bananas.
https://www.youtube.com/watch?v=PrmBWtOWYsA
You asked for it HoofHearted. I think you know the tune...
O where have the bananas gone,
We suffer waves of pain,
The purple guys won superbowl
Beyonce lip synced again!
America! America!
God shed his seamen in Greece
And Egypt's muslim brotherhood
Will charge us more to use their sea!
O stinky like bad pilgrim feet
Those wankers on Wall street
A thoroughfare of freedom lost
Here and in the Middle East!
America! America!
John Corzine knows the score,
Too big to fail or go to jail,
No liberty in law!
O beautiful war heroes lost
In liberating strife.
Who more than sacrificed themselves
And paid the ultimate price!
America! America!
We pray we've still got gold
But 'til the audit is complete
We'll print some more cheap green!
etc. etc.
Yes, this is all smoke and mirrors.
Why isn't Holder suing Fannie Mae, Freddie Mac and the FHA? (or at least shut down the FHA)?
This guy has charts showing that FHA, Fannie and Freddie engaged in reckless insurance and mortgage purchases since at least 2001. Why is it solely S&P's fault?
http://confoundedinterest.wordpress.com/2013/02/05/jefferson-the-fha-and...
for posterity:
http://www.zerohedge.com/news/guest-post-aaa-rating-or-not-crowd-sourced...
http://www.zerohedge.com/news/things-make-you-go-hmmm-such-transition-co...
Not a single fucking TBTF bank mentioned.
Oh, and who were Holder's biggest fucking contributors?...Goldman, JPM, BAC.
Fuck you Holder, fucking banking shit eater. Fuck off asshole.
hard to believe that a company caught red handed helping Greece fraudulently cook its books would do something like this. Hard to believe that when that same compnay literally runs the federal reserve and treasury that they would have some pull and immunity.
I think I agree with the historians who believe that, near the end of most empires, finance dominates - out of corruption then desperation
So many layers of shit involved here to make this 100% fitting in the new normal. Just saw a headline saying Holder cited "egregious conduct" in this case. Fast and furious anyone? This, along with Moody's not being implicated (for all too obvious reasons), is sickening.
(November 15, 2005) "With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly." - Ben Bernanke
(May 17, 2007) "All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable." - Ben Bernanke
hundreds moar...I'd like that little fuckers head on a stick.
Now we know why all the 7.62 x 39mm and .223 are drying up. It's getting downright expensive when you can find it on an auction site. Luckily some of us were prepped up. (And some have taken profits selling it to you bitchez who didn't prep.)
Thank you .Succint , clear - and to the point.
There are no words to describe how pathetic this justice department under Obama's leadership has performed.
Au contraire my friend. They have done a great job protecting interests of their cronies. Dick 'i shoot you' Cheney would be proud.
Bush's fault.
Right on. This has got to be a new all time low in the practice of political scapegoating and shirking of responsibility. Holder is just stunningly pathetic. A whole new type of transparent plastic has been revealed.
Please excuse my ignorance. I don't understand any of the ratings-related processes. Can someone explain to me what the motivation would be for S&P/Moody's or any other rating agency to commit this kind of fraud? Where's the money(implied)?
Thanks
Lehman here, but my understanding is that when rating agencies rated CDO's and MBS as AAA, they were essentially giving both those entities their blessing for the average joe to go ahead and invest in them.
They were of course receiving money from the entities involved in pushing the pieces of shit to give them such a high rating when everyone knew they were junk status. Those same pieces of shit were then shorting them and raking in millions. Think of it as paying off the referees.
Watch the movie "Inside Job."
SOS SOS SOS
Has anyone found a link to "American Casino" the 2009 film by Leslie and Andrew Cockburn?? An online stream link anyone? I have heard it is better than "Inside Job". Here's the interview from Cspan:
http://www.youtube.com/watch?v=rKKvMJeBBSA
SOS SOS SOS link please please
Both you and Eric Holder need to read "The Big Short", by Michael Lewis.
"S&P publicly represented that its ratings of RMBS and CDOs were objective, independent and uninfluenced by the potential conflict of interest posed by S&P being selected to rate securities by the investment banks that sold those securities."
Insofar as S&P, Moody's & Fitch are concerned, that is what these companies believed to be true; unbeknownst to them, the Banksters had figured out their ratings alorithms and gamed the CDOs/MBSs/etc to make sure they would get a AAA rating. S&P, Moody's and Fitch were simply incompetent to be rating these "Financial Weapons of Mass Destruction!" In this instance, S&P, Moody's and Fitch did NOT have to be part of the conspiracy, their participation can be explained as simple stupidity.
They get paid by the issuer to rate new issues. Bsically, bogus ratings are up for auction to the highest bidder. Highest bidder is the one who gives the best ratings.
I'm reminded of the line: "Wow, that's some catch, that Catch 22..."
Nice f'ing process... Jesus, God save us all.
I would add that the AAA rating was important if one is going to use these pieces of paper as collateral. All the bigs did just that and most of the paper ended up in the Repo market. When they lost the AAA rating, the repo market needs new collateral within 24 hours or the market gets......well you saw what happened when Lehman failed and Bear failed. The collateral was no longer AAA.
**edit in honor of "longsoupline" ** fuck you Bernacke, fuck you Holder......it never gets old and always worth a few precious green arrows.
Two things to keep in mind through all this:
1. The ratings agencies are paid by those issuing/marketing the debt. In short, they're paid by the same people whose debt they are rating. An obvious area for conflict of interest, but one that's been around for so long nobody is unaware of it. Everyone knew who was buttering their bread. Just that the butter may have been laid on a lot thicker than usual in certains situations. Most notably with what are now, in hindsight, called "toxic mortgage assets."
2. The rating on the debt is important because many institutional investors (read: big investors) often have certain rules or covenants about the minimum rating on a piece of debt they wish to invest in (purchase). This is common in pension funds and other places that are supposed to buy "boring safe stuff". So, if you've got a triple-AAA rating on a piece of debt the entire market is potentially your customer (and at a premium price). Down at triple-BBB the world of potential buyers is much smaller. Triple-CCC, smaller still.
The government limits the number of officially sanctioned ratings agencies and Moody’s and S&P are pretty much the whole show as far as pension funds are concerned. And the government also makes those ratings requirements for pension funds. Also it is the government that was and is the party most responsible for the prevailing low interest rate environment in the mortgage market and the mispricing of risk in general. Oh, and of course TBTF. That's the government too.
Investors and home buyers may now be more wary and it may now be harder for Wall St. to pass off shit as shine but the government hasn’t changed a damn thing on their end.
Does Mozillo turn up in the word search?
Exactly. Love your work Banzai!
no mention of going after the banks who fixed LIBOR??!?!!? "Shocker"
Mentioned this to a liberal friend who voted for Obama, didn't get it, didn't know who John Corzine was either. I educated him, no longer a friend. fuck em.
Full frontal fascism bitches...
As Russians say, a friend is person with who you would go to scout hostile territory together.
This person you talked about ain't friend of yours.
That has a much better ring to it in russian...
Ah, the look over there defense. Does anyone buy this shit anyomore? And notice it's always a CIVIL suit....for the suits. Sure the "settlement" will be 10% of one years' profits
Shareholders' profits not bonuses.
Martin Armstrong's had a lot to say about Holder.
DavidC
Here's an interesting excerpt from a recent Armstrong article. Not about Holder specifically, but the whole rotten system in general.
http://armstrongeconomics.com/when-i-was-wrong/
Stan and Poors an easy target, as opposed to the banks. Then Barry can come out and say see, we're tough on Wall Street, while everyone on said Street enjoys a good belly laugh and moar record profits.
No shit. The banks came up with this crap, all the ratings agencies did was rate the damn things. Uncover that the ratings agencies were "paid" for triple A ratings. Now you're getting somewhere...
Guilty of aiding and abbetting a "non-crime."
Bizarro World, indeed!
String the fuckers up.
Yeah , but after we hang Obama, Dodd, Frank, Raines, Waters, Conyers, and all the rest, what are we going to do with the ratings agencies??
Nationalize em, what else ?
I got the rope, you bring the beer!
Should be quite a party, though we may need more lamposts....and a shitload more rope.
;-)
You can chop up the rope afterwards and sell the pieces on ebay.Should bring a nice profit.
Hemp rope is very durable. I'm sure you could get plenty of use out of it.
Dear Mr. Holder, did the RMBS's and CDO's just magically appear at the rating agencies...or are you trying to say the banksters were'nt practicing alchemy too? Please get back to us at your conviemence...
Sorry, that is privilidged executive information. Kinda like the fast and furious firearms.
Sorry, that is privilidged executive information. Kinda like the fast and furious firearms.
Not Alan Greenspan, not Ben Bernanke, and certainly not Wall Street which made tens of billions in profits selling CDOs to idiots in Europe and Asia. Of course, the US consumer who had a gun held against their head when they were buying McMansions with no money down and no future cash flow is not even mentioned.
Well, lets not forget those idiots or the federal government itself which did everything it possibly could (acts, regs, legal pressure, FNM, FRE) to boost US home ownership rates.
Just a smattering of mortgage market riggin' friggin' from 1989/90 ALONE:
The HUD Reform Act of 1989
The Homebuyers and Renters Relief Act of 1989
The Department of Housing and Urban Development Accountability Act of 1989
The Community Housing Investment Partnership Act
The Recycling of Existing Assets for Cost-Effective Housing Act of 1989
The Low-Income Housing Credit Act of 1989
The Low Income Housing Preservation Act of 1989
The Housing Affordability Act
Homeownership and Opportunity for People Everywhere Act of 1990 (The "HOPE" Act)
Fair Lending Enforcement Act of 1990: To amend the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act
The Housing and Community Development Act of 1989
The Housing and Community Development Act of 1990
The Community Housing Investment Partnership Act
The Homeownership Assistance Act of 1989
The Home Mortgage Overcharge Prevention Act of 1989
The Neighborhood Mortgage Lenders Accountability Act
The Homeownership Through Sweat Equity Act of 1989
The Fair Lending Oversight and Enforcement Act of 1989
And that was way before lawyers like Barrack Obama started suing banks for having mortgage portfolios that didn't "look like America". Clearly we need more regulation here.