Standard and Poor, the financial rating credit company, has been around since the 1860's but they were recently introduced to the "Chicago Way" of governance. Tasked with issuing ratings for the debt of public and private companies, the company was the first to recognize that America's growing debt is a ticking time bomb that could explode on taxpayers and investors alike. On August 5, 2011, the company downgraded the US's sovereign debt from AAA to AA+. The Obama administration promised revenge and have extracted it.
Immediately upon issuing the change in ratings then Treasury Secretary Timothy Geithner threatened the Chairman of the company by promising the government would hold S&P "accountable" and their conduct would be "looked at very carefully." Two years later, Eric Holder's "Justice Department" did just that by filing a civil lawsuit against the company claiming they were responsible for the financial meltdown of 2008 because of their ratings of mortgage-backes securities. Other major credit rating agencies that issued similar, if not the very same ratings on the same financial instruments, were left alone.
The company tired to protect its reputation by fighting the allegations in court. Facing the opposition of the unlimited resources of the federal government and the threat of massive fines by the innovative thinking of DOJ's lawyers, the company was forced to seek a settlement, a move the New York Times declared "support[s] the conclusion that it is futile to fight government fines." The paper detailed how lawyers for the federal government "invoked an obscure federal law passed a quarter-century ago after the savings and loan scandals. The law, the Financial Institutions Reform, Recovery and Enforcement Act of 1989, or Firrea, requires a lower burden of proof than criminal charges and empowers prosecutors to demand unusually large penalties: up to $1.1 million per violation.” Faced with the threat of billions of dollars of fines, the company appears to have capitulated.
This president has increased America's debt load by a staggering $7 trillion dollars in only six years. The White House has sent a stark message to Wall Street -- ignore the growing debt crisis or face a similar wrath. S&P tried to warn us of the coming storm. For that they shouldn't be punished but they should be hailed.
