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Corruption of the “Innocent”

4 | By Shah Gilani

It’s time to rate the Justice Department.

But before we grade it, I want to go on record with a serious proposal.

I think its name should be changed.

Why? To protect the innocent the department drags through the mud. Where’s the justice in that?

It’s not fair that an outfit with a name like the U.S. Department of Justice has the power to extract billions and billions of dollars in “settlements” from innocent, stalwart U.S. institutions.

So, let’s talk about fairness…

Another “Watchdog” With No Bite

This is the United States – and we need to protect the innocent.

Take S&P, for example. A wholly owned division of McGraw Hill Financial Inc. (NYSE: MHFI), Standard & Poor’s Financial Services LLC was found innocent on Tuesday of allegations it committed fraud.

What’s worse, the supposed fraud S&P committed was back in 2007. For justice’s sake, aren’t there statutes of limitations on this kind of harassment of systemically important financial institutions?

Apparently not. The Justice Department decided, years after the facts, to look under the hood at the ratings agency. S&P, for its part, was astonished that such a long time had passed and all of a sudden it was being investigated.

According to Standard & Poor’s, Justice was acting on behalf of the Obama administration in digging up such old, forgotten little stuff that really didn’t have any consequences, because S&P had the nerve to downgrade the United States’ credit rating on Aug. 5, 2011, and peeps were pissed.

Of course, it didn’t matter that Justice had gathered evidence against S&P. In fact, it amounted to such a small amount that when S&P demanded that Justice show the ratings agency what it really had, Justice had to forklift more than 290 million documents stacked up in a warehouse.

I mean, come on!

Well, the story has a sad ending for S&P and a happy ending for Justice, which is why I’m so upset.

S&P neither admitted nor denied systematically changing rating models in 2007 to guarantee higher ratings to issuers of hundreds of billions of dollars of mortgage-backed securities, so it wouldn’t lose business to competitors who were making the same accommodating moves. However, S&P agreed to pay about $1.5 billion to settle the matter.

It pains me to see the innocent fleeced such!

After Justice Department head hit man Eric Holder threw an in-your-face, take your place, you backstabbers, party announcing the settlement on Tuesday, the Poor’s wee-buggers caught up in this injustice sheepishly said that this settlement “contains no findings of violations of law.”

S&P will now have to fork over about a year’s net profit, or $687.5 million, to Justice, $687.5 million to a bunch of greedy states that joined the suit, and a bunch of money to some little pension outfit known as the California Public Employees’ Retirement System (CalPERS).

Oh, the humanity!

So, before we grade Justice, using S&P’s rating system (yeah, now you’re going to get yours, Injustice Department!), I suggest we change their official name to the “U.S. Financial Services and Miscreants Settlement and Toll-Taking Department.”

Hold on, I’m checking with S&P on its rating grade…

Okay! S&P says if it was up to them, without even looking at one of its new models – which just happens to be under investigation by the U.S. Securities and Exchange Commission (SEC) as we speak – they’d give Justice a AAA rating.

Wow, that’s generous.

S&P explains – not really – that it looked to its municipal bond rating scale. Because Justice is a toll-taking business, S&P says it would classify it as a revenue-generating enterprise. And since Justice has the power to raise what it charges and go anywhere to force innocent peeps like us and our bank buddies through its booth, S&P says it’s an OUTSTANDING credit risk.

“So,” I replied, “that’s why none of you ever go to jail. You have to be free to pay the troll.”

Stories like this prove what we already all know – that the players on Wall Street are corrupt.

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Take, for instance, a company like Humana Inc. (NYSE: HUM), the $22.7 billion health insurance giant.

You wouldn’t think a company that large could bring its investors big, fast windfall profits, would you?

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I want you to see it. Watch the full details here.

4 Responses to Corruption of the “Innocent”

  1. Stanley says:

    S&P was instrumental in causing the 2008 financial collapse by fraudulently substantially overrating financial instruments. But nobody’s gone to jail. 20 years jail time and 5 year salary and (company profit) clawback for everyone above middle management. Furthermore the company should be disbanded with no compensation for large shareholders.

  2. Richard Berggren says:

    At first I thought you were serious. But this is a great, sarcastic take on those slippery wall streeters who always seem to be able to game the rules and never get punished. Companies, per se, can’t commit crimes. They are always committed by actual people within the company. Thank goodness some people are going to benefit from this crime. But, still, no one is going to jail. And they should.

  3. John Timothy Killen says:

    The fundamental reform, now urgently needed to prevent this happening again, is to eliminate regulation, by every level of government, of the rating agencies.

    Even better, they should be compensated by securities buyers & owners. Not by securities sellers and underwriters.

    Rating agencies, nowadays, are merchandisers, working for interests with paper to sell. They go hand and glove with stockbrokers who need facts, figures and opinions to give their clients. Their incentive is to avoid rocking the boat. And to give a more favorable opinion to the securities issuer who pays them the most.

    The fact that the rating agencies are licensed and regulated by a government gives the securities buyer a false sense of safety. Trustees hide behind these ratings, rather than doing their own research and their own thinking.

    But it is NOT effective in bringing about unbiased reports and ratings. Reports that a “prudent man” would seek out and pay for if he were truly doing his duty. As with many other types of regulation, it is the regulated who benefit, not the public.

    This regulation hampers competition in the field of providing information and opinions. It constitutes restraint of trade. Strictly speaking, It is not an impairment of the first amendment rights of those who would write about securities. But it is not as effective in serving the public interest as a totally un-regulated system would be.

    To do that the rating agencies, with their priceless data bases and information gathering systems, ought to operate as financial journals and other newspapers do. Paid in proportion to the value of the information and opinions they prove to be capable of delivering to their subscribers.

    In effect: Licensed only by their readers. AND MAY THE BEST MAN WIN !

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