I am usually in agreement with Dean Baker and jumping up and down on the case of Robert J. Samuelson of the Washington Post. However, in this case of Dean dumping on Samuelson for raising questions about the recently announced DOJ case against the S&P ratings agency for fraud back prior to the 2008 collapse, see http://www.cepr.net/index.php/blogs/beat-the-press/robert-samuelson-is-worried-the-justice-department-is-persecuting-sap , I am not fully in agreement with Dean. Dean accurately points out that all parties involved were convinced that the real estate bubble was going to continue, but that fraud may still have occurred as the S&P raters may have changed their business model and were rating derivatives and CDOs as AAA without any solid support.
So, why I am defending the often indefensible RJS? It is not because of any argument that he made. The problems are two in my view. One of them, mentioned by RJS, is that this is awfully long after the alleged crime (which indeed I think happened) to be finally be getting around to this. The other, more important and not noted by either of them, is that this is the only ratings agency to be so prosecuted, with a very large fine being requested, one large enough to trigger a bankruptcy of S&P's parent company, McGraw-Hill. Why is S&P the only one so charged? What sticks out to me is that S&P was the agency that downgraded the US debt rating after the debt ceiling in 2011, much to the annoyance of the administration at the time.
I happen to agree that this was somewhat questionable and obnoxious, although the breakdown of responsible decisionmaking in Washington was certainly something worthy of criticism, and it certainly was not illegal of S&P to make such a downgrade. But there is all together too much scuttlebutt that this prosecution is in fact in response to this particular action by S&P. They are being singled out among the various probably guilty ratings agencies for punishment possibly because they did something that annoyed the administration on policy grounds. This is arbitrary action that strikes me as being an inappropriate way to proceed. Either punish all of them, or none of them, and if punishing, then do it sooner after the alleged crime in question. This smells of a political payback.
Both your concerns don't make much sense. We have rules for how long the government can take to bring a case forward--they are called statutes of limitations. Getting a good case together can take time, and it is irrelevant if the case is brought immediately or two or three years after the crimes are committed. Better late than never.
ReplyDeleteSecond, S&P is singled out because the government have solid evidence that S&P committed a crime. They don't for the others (at least not yet). The fact that someone may not be punished doesn't mean you let everyone else go! Where's the logic in that?