Oh, what a tangled web we weave. The United States government has sued credit rating agency Standard & Poor’s over the ratings it gave to mortgages just before the financial crisis:
The U.S. government is accusing the debt rating agency Standard & Poor’s of fraud for giving high ratings to risky mortgage bonds that helped bring about the financial crisis.
The government said in a civil complaint filed late Monday that S&P misled investors by stating that its ratings were objective and “uninfluenced by any conflicts of interest.” It said S&P’s desire to make money and gain market share caused S&P to ignore the risks posed by the investments between September 2004 and October 2007.
The charges mark the first enforcement action the government has taken against a major rating agency involving the worst financial crisis since the Great Depression.
According to the government filing in U.S. District Court in Los Angeles, the alleged fraud made it possible to sell the investments to banks. The government charged S&P under a law aimed at making sure banks invest safely.
S&P, a unit of New York-based McGraw-Hill Cos., has denied wrongdoing and said that any lawsuit would be without merit.
It is without merit, but not for the reasons S&P thinks. See, this whole thing is hilarious, because the situation itself was created by the government. That’s right; if it wasn’t for government meddling in the credit rating market, this would never have happened: