S&P, rated R

One day someone will make "Standard & Poor's" the movie, which I doubt will be rated for general audiences, and Louise Story will likely write the treatment. For now, the 63 trillion dollars (CDS gross notional in 2008) question still remains how to rate the raters as to the extent they contributed to the credit cataclysm in whose wake we dwell. According to a story Ms. Story published today in The New York Times, the government is probing S&P. The goal appears to be bringing a civil suit, and the main thesis of the investigators is that the business side influenced the analysts' side not to "kill the golden goose." In other words, Henry Blodget & Co. redux, only with credit gizmos like ABS CDOs rather thatn .com stocks.

The inquest appears to have begun before the recent downgrade of US debt. Given that the rationale for the downgrade was exquisitely political, one cannot wonder whether this time the political and strategic side of S&P talked to the analysts. Knowing they were already under investigation, they may have considered the ploy of the victim of government intimidation to at least try to mitigate the reputational risk that would ensue if the allegations of collusion between the business and rating side were corroborated. As many pointed out, it would be hard to portray the rating failures of the credit crisis as mere ineptitude in such case.

Innuendos, all innuendos, admittedly easy to believe... But this is what you get when you lose credit (from the Latin credere, to believe), and that is what S&P, like his ABS issuing clients, cannot spare enough, "they've got 500 standards, and they are all poor!"