Rating agency charged with fraud
ANGRY ABOUT THE loss in value of your pension fund during the 2007-2008 economic collapse? You should be. A suit filed by the Department of Justice Feb. 4 places much of the blame on Standard & Poor’s for committing fraud in the way it rated subprime mortgage securities.
In the run-up to the financial collapse, rating firms like S&P misrepresented the risk in order to win the business of those seeking high ratings for their investment securities, according to the DOJ. In other words, S&P knew full well that securities backed by subprime mortgages carried substantial risk, but the firm still gave them a higher rating than they deserved in order to make money — as much as $150,000 per rating for a subprime-mortgage-backed security, according to the Associated Press. In some cases, risky investments received AAA ratings.
Many investors, including those looking for a safe haven for pension funds, relied on the accuracy of S&P’s ratings only to lose billions of dollars when the real estate bubble burst and the securities they had purchased plummeted in value.
Of course, the real estate crash also triggered a broader collapse of the economy, costing America and other countries millions of jobs.
As organized labor has long held, the greed and duplicity of large financial institutions on Wall Street brought down our economy — not the pensions or negotiated wages earned by union workers. Blaming unions for the nation’s economic woes is a dishonest tactic that has no basis in fact.
According to CNN, “Analysts have long pointed to ratings agencies as key culprits in the financial crisis.”
