market-ticker.org / By Karl Denninger / February 6, 2013, 08:29
And coupled with it are gross internal violations of the law by the government itself.
Octonion I underscores how inflated grades during the credit boom contributed to more than $2.1 trillion in losses at the world’s financial institutions after home-loan defaults soared and residential prices plummeted. The U.S. is seeking penalties against S&P and its New York-based parent, McGraw-Hill Cos., that may amount to more than $5 billion, based on losses suffered by federally insured banks.
“During this period, nearly every single mortgage-backed CDO that was rated by S&P not only underperformed but failed,” Attorney General Eric Holder said yesterday at a news conference. “Put simply, this alleged conduct is egregious, and it goes to the very heart of the recent financial crisis.”
And Moody’s and Fitch didn’t do the same thing?
Of course they did.
So why S&P?
Well, McClatchy says that Moody’s was dropped from the investigation in the summer of 2011 — right about the time S&P downgraded the US.
Investigator interest in Moody’s apparently dropped off around the summer of 2011, about the same time S&P issued the historic downgrade of the U.S. government’s creditworthiness because of mounting debt and deficits.
“After the U.S. downgrade, Moody’s is no longer part of this,” said the person familiar with the case, who demanded anonymity in order to speak freely about the matter.
Political prosecution is nothing new. Nor is political “protection.” We’ve seen so many examples since 2007, including Citibank which had its former Chief Risk Officer admit under oath before the FCIC that it knew it was selling crap securities into the market along with myriad other examples, that trying to list all of them would run to thousands of examples.
Never mind that the Department of Just-us has said on the record that part of their consideration when it comes to filing criminal charges is whether there would be a market disruption should a given firm be charged.