Crony Credit Ratings and the Debt Ceiling: Why the U.S. Won’t Lose Its AAA Bond Status

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It’s not that the US doesn’t deserve to lose it. There’s a pretty good case to be made that America should not have the AAA rating on its debt from Moody’s and Fitch that it currently does. But S&P lowered its rating on US debt from AAA to AA+ in 2011 and soon found itself with a lawsuit on its hands brought by the Justice Department for alleged ratings impropriety prior to the 2008 Crash.

To be sure there is plenty for all of the agencies to answer for. They all happily slapped AAA ratings on mortgage backed securities which were anything but prime investments. But S&P is the only agency dealing with a lawsuit.

Lesson here: Tow the line. If you (the ratings agencies) do anything to further reveal the fiscal charade officially you will be crushed.

(From The Motley Fool)

But that February 2013 suit only named Standard & Poor’s. Moody’s and Fitch — which had also issued AAA ratings for mortgage securities that proved to be anything but high quality — never got their time in the courtroom.

Standard & Poor’s shot back quickly, claiming they would defend themselves “vigorously.” The battle is far from over — these kinds of lawsuits tend to take years to reach a conclusion. But whether or not Standard & Poor’s wins or loses, it’ll have a costly legal bill to pay either way. Lawyers are the only winners in a high-profile case.

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