Was S&P downgrade an act of revenge?
Was S&P downgrade an act of revenge?
You might think Standard & Poor’s has something against the U.S. government, the way the ratings firm treated the nation's credit rating on Friday.
In fact, it does.
It's hard to view the monumental ratings downgrade in context without understanding the long-running feud between the government and ratings agencies. In April, Sen. Carl Levin, D-Mich., issued a scathing 650-page report contending that malfeasance at ratings bureaus like Standard & Poor’s was as much to blame for the housing bubble as any bank, and included a series of smoking gun e-mails that suggested that the firms knew they were profiting from unethical behavior. A little-known section of the Dodd-Frank financial reform bill also hits the rating agencies with new limits destined to undercut their lucrative business; the Securities and Exchange Commission is discussing right now just how to implement the new rules. The public comment period on new rules ended Monday.
Is the timing a coincidence? Or could the ratings downgrade from Standard & Poor’s be viewed as a shot back at a government that's been taking plenty of shots at the ratings industry lately?
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