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.

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