From 2000 until the third quarter of 2007, if you wanted to sell a mortgage backed security, and you wanted that security to get a higher rating than it deserved, you packaged decent mortgages together with crap, and called on S&P’s rating service to make shit look like gold.
From Wikipedia, The Financial Crisis Inquiry Commission reported in January 2011 that: “The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. This crisis could not have happened without the rating agencies. Their ratings helped the market soar and their downgrades through 2007 and 2008 wreaked havoc across markets and firms.”
I’m am saddened to announce that in light of S&P’s long history of rating securities they clearly had conflicts of interest over, we have decided to downgrade their credibility rating from a DD- to an FF+, with a negative outlook.
In case you’re wondering why the negative outlook, it’s due to our uncertainty that S&P can be trusted at all. An FF+ rating is the twenty-eighth lowest possible rating but still implies a modicum (the slightest bit of it) of credibility, but believe it or not, we’re not certain S&P has earned even that. Their ratings of mortgage backed securities stretched for nearly a decade; a record of dishonesty that has even North Korea wondering how any group of people could be so cavalier with the truth.
In fact, our downgrade of S&P came after seconds of painful deliberation, when it was discovered that executives of the firm may have received bonuses based on the amount of ratings their division pushed through the “mill”.
But nothing compares to our outrage over S&P’s insistence that these shit sandwiches earned S&P’s highest safety rating, a rating few American companies enjoy, along with the full faith and credit of the United States of America.
Yes, that’s right. S&P rated these mortgage backed securities to be on equal footing in terms of investor safety with the government of the United States; not on much lower footing, not even on slightly lower footings. Nay, S&P rated these securities to be exactly as safe as debt issued by the USA.
For that alone, we recommend that S&P ratings be avoided at all costs.