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The Cost Of Downgrading The US: $1 Billion

Tyler Durden's picture


Back in the summer of 2011 during the debt ceiling debacle, S&P did the unthinkable: it dared to speak the truth when it downgraded the US from its pristine AAA rating, setting off a stock market selloff and paradoxically sending bonds to record low yields. This resulted in a vindictive Tim Geithner promptly warning the Chairman of McGraw-Hill the US would retaliate (which it did), the termination of then CEO Devan Sharma (and his replacement with the all too friendly COO of Citibank), and most importantly, a still ongoing legal fight in which the DOJ sued S&P (and only S&P, not Moody's, not Fitch) allegedly for rating improprieties during the first housing bubble, but even 5 year olds knew it was just to teach S&P a lesson.

Today we learn just what the cost is for anyone who dares to downgrade the US. The answer: $1,000,000,000. That is the amount that S&P has decided it will agree to pay in a settlement with the DOJ to put all this "truthiness" unpleasantness behind it.

From Reuters:

Standard & Poor's Ratings Services decided to settle a pending lawsuit with the U.S. Department of Justice (DOJ) and is open to paying about $1 billion to settle it, the Wall Street Journal reported citing people familiar with the matter.


The DOJ filed a $5 billion lawsuit against S&P, a unit of McGraw Hill Financial Inc, in February 2013 accusing the agency of inflating ratings for mortgage bonds to boost fees from issuers.


While a settlement of $1 billion would fall short of the $5 billion sought by the Justice Department, the ratings agency does not want to admit wrongdoing, the Journal said citing the people.


S&P had earlier called the lawsuit "meritless" and said the DOJ was wrong in its claim that the ratings were "motivated by commercial considerations."


Representatives of S&P and the DOJ were not immediately available for comment.

In light of this farce, perhaps it is time to amend the first amendment: all speech is free, except that which actually reveals the truth and/or that the emperor is naked. In that case, "speech" will cost you just about $1 billion. On the other hand, everyone else who is happy to perpetuate the lies this system is based on, those are and will remain perpetuity, free of charge.


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Wed, 07/16/2014 - 14:41 | 4963674 fonzannoon
fonzannoon's picture

RIP Sean Egan

Wed, 07/16/2014 - 14:46 | 4963706 Hippocratic Oaf
Hippocratic Oaf's picture

The truth is we're A- best on negative watch.

Why are we so different than PR a year ago?

Sue me mother fuckers

Wed, 07/16/2014 - 14:53 | 4963760 gmrpeabody
gmrpeabody's picture

Does the settlement include an upgrade...?

Wed, 07/16/2014 - 15:06 | 4963818 Stackers
Stackers's picture

It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.

~Joseph Gobbels

Wed, 07/16/2014 - 15:11 | 4963850 SilverIsKing
SilverIsKing's picture

Can't wait for Suzie Orman to downgrade the US.

Wed, 07/16/2014 - 16:05 | 4964090 TeethVillage88s
TeethVillage88s's picture

I wonder if DOJ used the NSA to see if there was other interested parties behind the move by the S&P.

I mean sure the US should be much lower as should much of Europe, but suppose the Wire Taps showed China and French Banks has made a financial deal of some kind with S&P to make this happen.

Clearly financial managers are dumb enough to do this. But may not have been aware that NSA had everything Wired.

Wed, 07/16/2014 - 19:21 | 4964904 earleflorida
earleflorida's picture

frontrunning the game of ...?


Wed, 07/16/2014 - 17:03 | 4964319 sof_hannibal
sof_hannibal's picture

maybe she'll be part of the banker suicides...

what's one billion dollars now a days anyway?; that's some US chump, whipe your debt in A$$ change right there

Wed, 07/16/2014 - 15:54 | 4964045 BigJim
BigJim's picture

 It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.

~Joseph Gobbels

Great qoute - but he probably never said it.

Wed, 07/16/2014 - 15:07 | 4963824 smlbizman
smlbizman's picture

talk about inflaition...i remember when it was a buck o five.....

Wed, 07/16/2014 - 15:02 | 4963804 Winston Churchill
Winston Churchill's picture

Bollocks.CCC- at best, and thats stretching it.

The US is bankrupt and the hyenas are circling.

Anyone that thinks UST's are safe,needs committing now.

Wed, 07/16/2014 - 16:06 | 4964095 TeethVillage88s
TeethVillage88s's picture

Any word on the Belgian Bulge???

I guess official data release for May comes out end of July.

Wed, 07/16/2014 - 14:50 | 4963729 Thought Processor
Thought Processor's picture




That outa send a clear message to any other rating agencies that try to shed light on the truth.



"In a time of universal deceit - telling the truth is a revolutionary act." - George Orwell 


Wed, 07/16/2014 - 14:55 | 4963770 666
666's picture

Will other countries also sue them for their respective downgrades?

Wed, 07/16/2014 - 16:09 | 4964102 TeethVillage88s
TeethVillage88s's picture

Very litigious when it comes to their own asses and mission.

But for 2008 Financial Crash, AAA Rate Toxic Shit, Sub-prime Documents left blank or no documents or no record keeping by the most sophisticated financial minds in the world... Not So Much.

Wed, 07/16/2014 - 17:46 | 4964537 TheFourthStooge-ing
TheFourthStooge-ing's picture

Isn't Egan-Jones eligible for release from ratings jail later this month?

Wed, 07/16/2014 - 14:42 | 4963675 Q-Q-Q
Q-Q-Q's picture

When all that is left is threats to others to avoid the's pretty much over.

Wed, 07/16/2014 - 14:47 | 4963708 disabledvet
disabledvet's picture

Wrong entity...and I think he was spot on on the right ones actually, namely State and muni debt. That would include the Rockefeller Institute in Albany, NY as well.

This math is well known...and now emphatically known is the consequences of "ramping up an equity bubble to pay for it all."

Find the right States to live in folks...or better yet "create your own."

It's really just a State of Mind at this point anyways.

Thu, 07/17/2014 - 02:01 | 4964002 Dubaibanker
Dubaibanker's picture

So, we cannot call a banana, a banana?

Effective tomorrow, US Govt has announced that all bananas shall be called as apples!

Anyone who calls a banana a banana, will have to pay a billion dollars!




Wed, 07/16/2014 - 14:41 | 4963678 Al Huxley
Al Huxley's picture

How much will the DOJ be suing the BRICS for, for daring to start up their own development bank?

Wed, 07/16/2014 - 14:41 | 4963679 buzzsaw99
buzzsaw99's picture

ratings agencies are worthless as tits on a boar

Wed, 07/16/2014 - 14:46 | 4963709 Al Huxley
Al Huxley's picture

They play the important role in the system of legitimizing the idiocy.  But its important that they stay together as a herd, and remember that its the debt issuers who they're responsible.  Dissenting opinions or foolish considerations about things like creditworthiness or risk aren't allowed.

Wed, 07/16/2014 - 14:49 | 4963727 buzzsaw99
buzzsaw99's picture

all three would and did stamp dog shit AAA for a fee

Wed, 07/16/2014 - 15:00 | 4963789 Al Huxley
Al Huxley's picture

If the dog paid them to rate its shit, I'm sure they would, especially if the dog was systemically important.

Wed, 07/16/2014 - 14:58 | 4963757 Hippocratic Oaf
Hippocratic Oaf's picture

Ratings agencies were lazy and able to be pushed around for a vig.

Now? They are covering their ass at every opportunity. It's almost as if they are trying to be first to downgrade shit as to not get caught with their pants down.

Blame the banks and bankers:'yea, trust us....these CMO/CDO securities are worth a AAA rating and the bottom tranche, uhhhh.....just give em a BBB. Can we make a secondary market ? Oh, oh yea, no problem there.'


Moody's/S&P/Fitch: 'Duh......ok, guys, you're buying the 1st round at Peter Lugers'

Wed, 07/16/2014 - 16:13 | 4964118 TeethVillage88s
TeethVillage88s's picture

"They play the important role in the system of legitimizing the idiocy."

The same for US General Elections.

Welcome to Finance101, the Military Republic.

Wed, 07/16/2014 - 14:50 | 4963734 venturen
venturen's picture

yes because investment banks are so honest! 

Wed, 07/16/2014 - 14:49 | 4963735 toady
toady's picture

Still, it's sad to see them get fucked for telling the truth (or at least starting to... the US should be rated junk).

I guess that'll learn'em.

Wed, 07/16/2014 - 15:03 | 4963798 buzzsaw99
buzzsaw99's picture

they thought they could get their credibility back by downgrading the usa. they will never get their credibility back. they had a good reputation but sold it for 30 pieces of silver. (i heard) the last time fitch suggested to an entity they should do something to help their credit rating they told them to stick it up their ass and who the fuck are you anyway? ratings agencies are worthless.

Wed, 07/16/2014 - 14:41 | 4963681 JustObserving
JustObserving's picture

From Zero Hedge (8/22/2011)

As the FT reports, "The McGraw-Hill board made the decision to replace Mr Sharma at a meeting on Monday, where it also discussed an ongoing strategic review." Alas, this is nothing but a case study of modern corporate reality in America: if you are not with the status quo, you are against it, and you are promptly booted out of it: anyone who does not share the visions of one glorious future built on ponzi schemes, houses of cards, and games of three card monte, will be promptly suicided, either physically or professionally.

We expect that this flagrant example of how the powers that be will deal with any dissenters will instill the fear of god in anyone at either Moodys (or the French sycphants from Fitch) and nobody will ever again menton the words "US" and "downgrade" in the same sentence.

Wed, 07/16/2014 - 16:20 | 4964152 TeethVillage88s
TeethVillage88s's picture

Having the Effect of

1) Disincentive to tell the Truth
2) Squelching Whistleblower Reporting
3) Hiding Wasteful Government Activities
4) Discouraging Employees to report wrong doing, fraud, waste, abuse of federal or taxpayer funds
5) Encourages Racketeering & Cartel Behavior
6) Enables Banking Trust Activity

Wed, 07/16/2014 - 14:42 | 4963684 LawsofPhysics
LawsofPhysics's picture

Truth is always treason in an Empire of lies.  Time to find out who still wants to be part of the U.S....?

No, that's far too optimistic, so, same as it ever was...

Wed, 07/16/2014 - 14:43 | 4963693 t0mmyBerg
t0mmyBerg's picture

Another abuse of power.  Impeach Holder and Obama both.  This is a jaw dropper, predictable, but a jawdropper just the same.  We live in some kind of freakish wonderland where the only qualification for being in  a position to destroy the lives of millions is either doctrinal academic purity or rock star charisma.  When does the revolution start?

Wed, 07/16/2014 - 14:47 | 4963712 pupton
pupton's picture
"Truth is treason in an empire of lies" - George Orwell
Wed, 07/16/2014 - 14:48 | 4963720 gdiamond22
gdiamond22's picture

Where does that $1billion go?

Where does the DOJ estimate $5billion as the appropriate fine for downgrading a group of cowardise elite oligarchs?

I'm going to hop over to MSNBC, I'm sure they have full coverage and outrage over this /sarc

Wed, 07/16/2014 - 14:48 | 4963723 Quinvarius
Quinvarius's picture

Now that they have been totally investigated, they should downgrade again.

Wed, 07/16/2014 - 14:52 | 4963755 toady
toady's picture


Wed, 07/16/2014 - 14:49 | 4963730 1stepcloser
1stepcloser's picture

substandard and Poorer is how I feel about this 

Wed, 07/16/2014 - 14:50 | 4963739 Dapper Dan
Dapper Dan's picture

Question: Who will get the check for one billion?

After attorney fees and court cost that is.


Wed, 07/16/2014 - 15:00 | 4963793 toady
toady's picture

Better yet, who'll get the bill?

Is this going to be the taxpayer bailout, TBTF, thing again?

Wed, 07/16/2014 - 14:51 | 4963742 Seasmoke
Seasmoke's picture

Every day I wake up, I think things can't get more fucked up than yesterday and then I am proved wrong again and again. This is some fucked up crazy Groundhog Day we are living thru. 

Wed, 07/16/2014 - 14:52 | 4963752 taketheredpill
taketheredpill's picture




"No Prior Restraint"


Which means you can say anything you want.  We won't stop you.  But if you say something that we dont want you to will be royally fucked.

Wed, 07/16/2014 - 14:53 | 4963761 orangegeek
orangegeek's picture

Holder needs to be shot and pissed on

Wed, 07/16/2014 - 14:59 | 4963785 discopimp
discopimp's picture

Dear Orangegeek,

Thank you for your request.  According to Washington DC / Homeland Defense Regulations you need to reverse the order of your reqest before it can be granted.  

Plaase re-sumbit your application for final approval.


Wed, 07/16/2014 - 14:54 | 4963767 Steve in Greensboro
Steve in Greensboro's picture

Best if the ratings agencies did not rate the sovereign's debt.  If you can't even pretend to be honest, what's the point?

Government thugs.

Wed, 07/16/2014 - 14:56 | 4963771 Absalon
Absalon's picture

I am a moderate but this is a sign that it is time to give up on any hope for integrity in government.

Wed, 07/16/2014 - 15:08 | 4963836 cougar_w
cougar_w's picture

You are only about 20 years late doing so. It's fine, we all like to think the best of a situation. But rest assured in about 12 months there will be actual attacks on politicians and by then you'll realize that hoping for integrity died ages ago. What comes now is the destruction of the republic, the disintegration of the concept of states bound in unity and cooperation, and the evaporation as an institution of the entire Federal level of governance.

I give it a few years to live, tops. The 2016 elections will become a circus of blame and finger-pointing, and then it will be over. Forever.

Wed, 07/16/2014 - 14:56 | 4963772 discopimp
discopimp's picture

Your forgetting the 1000 of hours of legal billings paid by S&P as well - so add another $20Million onto the pile.  Not to mention what it cost us serf for .gov to go after these financial terrori$t$.  

Wed, 07/16/2014 - 14:56 | 4963773 Yen Cross
Yen Cross's picture

    The credit ratings agencies are just sock puppets for the banks anyways.

   S & P = Snake-oil & Ponzi

Wed, 07/16/2014 - 14:58 | 4963781 Colonel Klink
Colonel Klink's picture

I'm sure to be transferred to "select" off shore accounts of those in power.

Wed, 07/16/2014 - 14:59 | 4963786 Bill of Rights
Bill of Rights's picture

USDA Suggests Changes to Grocery Stores to ‘Nudge’ Consumers to Eat Healthy | Washington Free Beacon

The “MyCart grocery cart” would provide dividers for shoppers to make sure they are selecting enough items in each “MyPlate” category, the USDA’s food icon.

“MyCart is a nonfinancial approach that would use behavioral economics to encourage healthier purchases by any consumer, including SNAP participants,” the report said.

The cart would be color-coded, physically divided, and have a system installed so that when the shopping cart reaches its healthy “threshold” it would congratulate the customer.

“The algorithm would group the purchases to classify them using the MyPlate designations and to provide consumers with a message of support or encouragement (e.g., “You achieved a MyCart healthy shopping basket!”),” the report said.

The panel based this approach on a $999,891 government-funded study entitled “Nudging Nutrition,” arguing the research “suggests an intervention of this sort might be successful in modifying consumer shopping behavior.”



I weep for the republic. 

Wed, 07/16/2014 - 15:14 | 4963861 GooseShtepping Moron
GooseShtepping Moron's picture

What a crock of shit. Grocery stores already have their display planners dictated to them by the corporate central office, whose merchandizing recommendatons require resets in some area of the store every 6-8 weeks. Once the Federal Government gets involved by requiring stores to remerch "healthy choices" for the benefit of the FSA, it will drive the shopping experience to even more abysmal depths than it is at already. This is horrific.

Wed, 07/16/2014 - 15:02 | 4963800 cougar_w
cougar_w's picture

S&P made a tactical error during a global end-game. I don't know what they expected to happen to them, but the resutls were 100% predictable. We live in a time where proper accounting and discovery (not to mention, rule of law) are utterly destroyed concepts. This situation will not be reversed for 100 years, assuming there is still enough money around to justify a "financials industry" which I seriously doubt. Anyone now thinks they are gong to "do the right thing" so they can emerge from the crisis later with their integrity intact doesn't understand that nobody is going to emerge from anything -- ever -- with anything intact. This black hole is going to devour everyone and nobody will recall that S&P once did the right thing.


Wed, 07/16/2014 - 15:04 | 4963815 centerline
centerline's picture

...utterly "dangerous" concepts.  Threats to national security even.

Wed, 07/16/2014 - 17:20 | 4964413 FredFlintstone
FredFlintstone's picture

If what you say is true (and I do not doubt it) and there is no way out of here, then we should all log out and just enjoy our remaining days. However, I think we are all banking on the idea that there is a way through it and somehow we will be smart enough to figure it out in time.
I go back and forth on this from time to time.

Wed, 07/16/2014 - 15:03 | 4963807 centerline
centerline's picture

US Gov, same as other governments, is starving for money.  They are going to step up the lawsuits against anyone and everyone.  This is where we start to see the sharks eating other sharks.

Wed, 07/16/2014 - 15:10 | 4963845 cougar_w
cougar_w's picture

End-game. Nobody gets out alive.

Wed, 07/16/2014 - 15:28 | 4963932 LawsofPhysics
LawsofPhysics's picture


Wed, 07/16/2014 - 15:15 | 4963867 cn13
cn13's picture

Just another example of the totalitarian control the U.S. government has taken over everyone and everything.

The S&P attack was an merely a lesson to anyone who dares to stand up to the U.S. government.

The ligitagation costs alone in competition with the U.S. government that has a endless pocketbook is enough to make anyone scream for mercy.

Not to mention the negative press.

This administration has used both the justice department as the IRS to punish any dissention from the public.


Wed, 07/16/2014 - 15:19 | 4963888 JRobby
JRobby's picture

S&P spoke the truth..................for once. I agree.

Fuck S&P. Whores.


Wed, 07/16/2014 - 15:28 | 4963935 Bastiat
Bastiat's picture

No doubt S&P deserves that and worse for their part in the securitzation end of the subprime stream.  But they were likely targeted for revenge.

Wed, 07/16/2014 - 15:44 | 4964003 Cacete de Ouro
Cacete de Ouro's picture

Maybe that's why Platts (owned by McGraw Hill) never had a chance in the recent Silver Fixing competition

Wed, 07/16/2014 - 15:45 | 4964009 CoastalCowboy
CoastalCowboy's picture

The end of this financial charade will be when the entire US becomes Lebensraum for the Chinese and not a moment sooner.

That's just what happens when anyone dares to challenge any political entity be it a church, a corporation, or a government with the truth. Unfortunately, America's chickens will eventually come home to roost in a very bad way.

Wed, 07/16/2014 - 16:30 | 4964181 TeethVillage88s
TeethVillage88s's picture

I can see it now.

Drive into a new part of the city or an outside community and then get into altercations for not being a "Rule Follower". We will have citizens with accents telling us the rules and calling the cops on "US".

Wed, 07/16/2014 - 17:18 | 4964401 sof_hannibal
sof_hannibal's picture

First, NATO will have to confiscate Americans' right to bear arms... China doesn't want to be taking over real estate in a hostile country with armed citizens, who wouldn't? But, the only thing left backng our debt is land; so it is imperative we sell it all to China to keep financing QE. I mean, what other choice is there... TOO BIG TO FAIL, what don't we understand here? Bankers must be saved !!! All anxieties must be tranqualized...

Wed, 07/16/2014 - 15:51 | 4964038 MFL8240
MFL8240's picture

The US is a ruined country, not because it has large debt but because it has lost all its morals and we have people like Pelosi, Reid, Holder and Obama to thank for this.

Wed, 07/16/2014 - 17:22 | 4964416 sof_hannibal
sof_hannibal's picture

toatz if O'Bama Pelosi and Reid and Holder would just committ suicide; things would be way better. There's so many better politicans, not backed by corporate lobbyists out there waiting to implement the gold standard in an let them eat Rand style orgy... inlcude Hiliary in there... and Bill... Kerry and Gore too...

Wed, 07/16/2014 - 15:59 | 4964066 kchrisc
kchrisc's picture

"You can't down grade us, we down grade you.  Capisce?!"

Wed, 07/16/2014 - 16:15 | 4964121 yogibear
yogibear's picture

The US tried to pressure Russia but Putin showed Obama and Holder his big nukes and laughed at them.

Wed, 07/16/2014 - 16:36 | 4964195 sosoome
sosoome's picture

"As an added note"' said the spokesman, "this rating agency continues it's dedication and committment to accurate and straightforward ratings based on fact, and ratings are not subject to political persuasion."

Wed, 07/16/2014 - 16:45 | 4964230 esum
esum's picture


Wed, 07/16/2014 - 16:59 | 4964308 pashley1411
pashley1411's picture

In the end, you will see, they got off light.

Wed, 07/16/2014 - 17:14 | 4964379 sof_hannibal
sof_hannibal's picture

So the $$ the dollar $$ can't ever be worth nothing if somone says that you can't say it is? Seems to be working well so far; Brentwoods Deal = success. We need to put Nixon's head back in office...

Wed, 07/16/2014 - 18:41 | 4964711 earleflorida
earleflorida's picture

S & P Rating Agency is basically owned and operated by the BIS[?] via     and, own via   which   (every published educational text book in the known world, and every category imaginable )   is now owned by Michael (Drexel Burnham Lambert [Ivan Boesky]) Milkin's 1st Lieutenant Leon Black  that was exonerated on the testimony of a certain    Wilbur Ross.

Mr. Black is  with connections via

but, as I've said many times before, it is near impossible to get a whiff of colusion regarding the Rothschild's family, Rockefeller's family, Mellon [?] family except for the NY Banker's, etel., carrying their water...


thankyou Tyler

Ps, These families are $Trillionaires$... that tells a sad tale of ? 

Wed, 07/16/2014 - 21:25 | 4965296 asiafinancenews
asiafinancenews's picture

This is the more interesting DOJ Complaint  against Standard & Poor's:


Sun, 08/03/2014 - 06:02 | 5039817 Lea
Lea's picture

My question is, why does S&P agree to pay anything? Is it a Mafia-like racket, something like "pay or we will break some furniture around here, kidnap your sons and kill your momma?"

If anyone knows...

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