The Cost Of Downgrading The US: $1 Billion

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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