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  • Gangster Government–The Attack On Standard And Poor

    In 2011, concerned about the growing debt crisis, Standard & Poor, the venerable credit rating firm, downgraded the U.S. bond rating for the first time from “Triple-A” to “AA-plus,” a move that sent shockwaves through the financial markets raising troubling questions about the government’s growing debt. The move hit a nerve with a White House gearing up for a massive re-election campaign. Then Treasury Secretary Timothy Geithner called the Chairman of McGraw Hill, the owners of S&P, declaring that the government would hold S&P “accountable” and their conduct would be “looked at very carefully.”

    Geithner wasn’t bluffing. The Obama Administration struck bank against S&P, filing a civil lawsuit five years after the financial meltdown of 2008, alleging that S&P played a critical role in the crisis in their ratings of Residential Mortgage-Backed Securities. Seeking $5 billion dollars in compensatory damages, no doubt to line the pockets of his favorite liberal community organizing groups, Attorney General Eric Holder declared, “Put simply, this alleged conduct is egregious – and it goes to the very heart of the recent financial crisis.” There was, of course, no sign of any investigation or lawsuit prior to the S&P’s downgrade of the Obama spending spigot and Moody’s, the other large credit rating firm that had similarly rated Residential Mortgage Backed Securities, magically managed to avoid Holder’s scrutiny.

    The company was experiencing what Michael Barone once called “Gangster Government,” President Obama’s Chicago-style of governing. In response, S&P asked a federal judge for transcripts and information relating to conversations and emails from the White House pertaining to the downgrading of U.S. debt, they were castigated by the Justice Department as taking part in a “fishing expedition.”

    The New York Times is now reporting that S&P has realized that fighting the government to protect your well-earned reputation can be a fool’s errand. In an article entitled “S&P Nears Settlement with Justice Over Inflated Ratings,” the Times reports that a “settlement would support the conclusion that it is futile to fight government fines.” The paper notes that “[T]o maximize cash payouts, prosecutors have 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 sword of Damocles, S&P cut their potential losses.

    It is clear this action by DOJ is nothing more than reprisals from the S&P’s honest assessment of America’s mismanaged financial books. The company, rather than face potential bankruptcy for doing its job, has thrown up its hands, another victim of “Gangster Government.” The sad reality is that the White House has governed this way for six years and the media and other watchdogs gather a collective yawn over their way of doing business.

    The Administration has sent a message throughout the financial markets — when it comes to America’s growing debt, it is prudent to see no evil, hear no evil and certainly, speak no evil.


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    Roberto Escoban

    Roberto Escoban is the pen name of a conservative activist who spent 20 years working in Washington including a decade on Capitol Hill.

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