It just never ends.
So the Justice Department has sued S&P claiming that they issued knowingly-false ratings on various structured products that they knew were going to blow up.
There is one glaring problem – the supposed “injured party” is the issuer!
That’s right folks — the claim is apparently that Citibank (among others) created crap, asked S&P to rate it, they did, and then they bought their own crap and were injured by it.
But you see, in this fairy-tale land of the SEC, the creator of the crap didn’t know it was crap, even though in in the instant case that Citibank’s former risk officer testified under oath that in 2006 60% of their loans were defective — and 80% were defective in 2007.
This was the Chief Risk Officer and his assessment of whether the loans were “authentic” (as represented) or whether they were chock full of lies and material misrepresentations.
How can you sue when you knowingly buy something that your own people intentionally created in a bogus manner and which you thus knew was crap, irrespective of what someone else said? How could you rely on someone’s outside opinion when you know the facts and do not need to rely on opinions at all?
There’s no basis for this lawsuit. There are a crazy number of reasons that people should be sued and prosecuted, but this isn’t one of them. If I create rat poison and then having done so, eat it, it’s my own damn fault if I die as a consequence.
What was going on here is that BAC and Citibank (among others) were intentionally defrauding everyone in sight — including the regulators. By taking crap loans (which they owned) and packaging them into securities that they then bought a “AAA” label forthey were improving their capital ratios since the risk was made to magically disappear.
Citibank wasn’t a victim of anything — they were the protagonist and the entity committing the offense! The entity playing the games here was the bank itself, not the ratings agency. They knowingly took crap and packaged it, then bought the packaged crap they solicited the bogus ratings on for the purpose of improving their apparent capital and thus making the firm look stronger than it really was, and all of this was intended to (and did) result in bonuses for executives and stock price advances — until it blew up in their face.
Rather than prosecute the bad guys Eric Holder now chases after someone who went along because they were paid rather than busting the entity that orchestrated the entire mess in the first place.
This is yet another political farce intended to protect the guilty.