Revenge: Obama’s Targeting of Standard and Poor’s

Arnold Ahlert is a former NY Post op-ed columnist currently contributing to JewishWorldReview.com, HumanEvents.com and CanadaFreePress.com. He may be reached at atahlert@comcast.net.


article-2211350-154C584F000005DC-962_634x484The federal government’s lawsuit against ratings agency Standard and Poor’s has been hit by a potential bombshell. In January, the Wall Street Journal reported that Harold McGraw III, Chairman and CEO of S&P’s parent company, testified that after the agency downgraded the nation’s triple-A credit rating, he received a telephone call from then-Treasury Secretary Tim Geithner saying the ratings agency would be “looked at very carefully.” On Monday, the Wall Street Journal learned that the call between Geithner and McGraw occurred only five minutes after Geithner met with President Obama in the Oval Office.

S&P, which garnered the information by examining Geithner’s public schedule, included it as part of a filing in federal court in the Central District of California. They contended that the timing of the Obama-Geithner conference could support the idea that they were singled out for retaliation, rather than the government’s claim they are guilty of fraud. Unsurprisingly, the Justice Department is accusing the agency of a “fishing expedition” and is urging U.S. District Judge David Carter to deny them access to the records.

In the January affidavit, McGraw submitted a sworn statement to the court, describing an unsettling chain of events that began with S&P’s U.S. debt downgrade, issued on August 5, 2011. He contends that on August 8, he was informed by an official from the Federal Reserve Bank of New York that Geithner “was very angry at S&P.” Geithner who had previously run the New York branch of the Federal Reserve, allegedly called McGraw. When McGraw returned the call, Geithner allegedly “expressed anger at the downgrade.” An argument ensued, with former Treasury Secretary contending that S&P had made an error in their assessment. McGraw countered that the agency had relied on official statistics provided by the Congressional Budget Office. According to the affidavit, Geithner continued to insist that S&P had made an error. “You are accountable for that,” he allegedly warned McGraw.

McGraw’s sworn statement continued:

As I reported contemporaneously to my colleagues, [Mr. Geithner] said that “you have done an enormous disservice to yourselves and to your country,” that the U.S. economy was bad and that the downgrade had done real damage. S&P’s conduct would be “looked at very carefully” he said. Such behavior could not occur, he said, without a response from the government.

On Feb. 4, 2013 the Justice Department, led by U.S. Attorney General Eric Holder, filed a lawsuit seeking up to $5 billion in civil penalties from S&P. They claimed that from September 2004 through October 2007, S&P “knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors in” CDOs and securities backed by residential mortgages. Moreover, the agency “falsely represented that its credit ratings of RMBS and CDO tranches were objective, independent, uninfluenced by any conflicts of interest that might compromise S&P’s analytical judgment, and represented S&P’s true current opinion regarding the credit risks.”

The DOJ further alleged that the “desire for increased revenue and market share” led the ratings agency to “downplay and disregard the true extent of the credit risks.”

S&P countered that the same CDOs in question were given the same high ratings by a rival agency, and that they were being singled out for the failure to foresee the extent of the housing bust “despite [the] failure of virtually everyone to do so.”

The feds are not suing other ratings agencies, such as Moody’s, whose ratings were identical to S&P’s on nearly every security contained in the lawsuit. No doubt it is sheer coincidence that one of Moody’s owners is Berkshire Hathaway, a firm run by outspoken Obama supporter Warren Buffet. Moreover, released transcripts of Federal Reserve meetings occurring in 2006, during Bernanke’s first year as chairman, show that Fed officials believed the nation could navigate a “soft landing” from cratering home prices — with none other than Geithner himself expressing confidence that “collateral damage” to the economy could be avoided. “We just don’t see troubling signs yet of collateral damage and we are not expecting much,” Geithner said at the September 2006 Federal Open Market Committee (FOMC) meeting.

In an even greater irony, the government charged S&P under the auspices of the Dodd-Frank Wall Street Reform and Consumer Protection Act. One of the bill’s architects was Sen. Barney Frank (D-MA). In a 2005 speech on the House floor, Frank contended, “homes that are occupied may see an ebb and flow in the price at a certain percentage level, but you’re not going to see the collapse that you see when you talk about a bubble. As so those of us on our committee in particular will push for home ownership.” Frank remains completely unscathed by his prognostication, even as S&P remains a target of his law.

McGraw’s testimony essentially alleges that the lawsuit is a smokescreen hiding the government’s real agenda, which is nothing less than retaliation for the downgrade. It is quite possible that the Obama administration, undoubtedly infuriated by concessions it was forced to make in exchange for raising the debt ceiling, was embarrassed by the S&P downgrade, especially when the agency explained that it “reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.”

After S&P made its filing last month, the Justice Department countered with a filing of its own on Feb. 17. The DOJ contended that their investigation of S&P began in 2009, long before the downgrade occurred, and that the agency didn’t provide sufficient evidence that the lawsuit was retaliatory. Therefore, S&P wasn’t entitled to information regarding the DOJ’s decision to sue, or other communication that occurred in other government offices. The DOJ is also refusing to turn over any material related to the large banks they claim were the victims of S&P’s alleged misdeeds. The ratings agency wants the documents of any government analyses or studies regarding the independence and objectivity of all rating services to see if these banks really believed they were being defrauded solely by S&P, even as competitors Moody’s and Fitch ostensibly remain above reproach.

When S&P filed its latest affidavit, Geithner spokeswoman Jenni LeCompte stated in an email that “the allegation that former Secretary Geithner threatened or took any action to prompt retaliatory government action against S&P is false.” The DOJ countered McGraw’s allegations as well. “This is the first time this allegation is being made 2½ years after the call purportedly happened,” a DOJ official said, even as he added that lawyers involved in the litigation against S&P were unaware of Geithner’s alleged comments.

There were a lot of villains associated with the housing bust, including the Department of Justice itself. In fact, long after the bubble had already burst, the DOJ was still forcing banks they now portray as victims to issue mortgages to minorities with shaky credit or face charges of discrimination.

Guilty or innocent, S&P deserves every opportunity to defend itself. That the DOJ is determined to prevent the ratings agency from seeing material relevant to that defense speaks volumes. Judge Carter could do the entire nation a favor by ruling for S&P in this latest filing. The ratings agency is far from alone in the desire to see the inner workings of an administration with a decided penchant for withholding critical information and intimidating its adversaries.

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  • The Facts

    Lies. I knew the housing bust was coming in 2003. Nothing but that could happen when a small single family house in a terrible neighborhood is selling for $800,000 and the mayor of every city is pushing a commission to steer Spanish speakers into soft second mortgages. Uncontrollable inflation fed by a deliberately provided supply of unlimited credit can only result in a bust. You can expect the bust shortly after inflation outstrips banker’s willingness to lend. You can expect a national economic bust shortly after debt interest outpaced yearly GDP.

    Mr. Ahlert amuses with his application of the “singled out” argument. Any criminal can be singled out at any time. That’s the risk of being a criminal.

    • Well Done

      The 0bama administration are the criminals. S&P is merely a financial analysis company. Should it be common practice to “single out” your teacher for not giving your plagiarized, incompetent essay an “A” grade?

      • The Facts

        Yes. The Obama administration are also criminals. What now?

        • Well Done

          Lock ‘n’ Load

  • rbla

    S&P like the other ratings agencies made out very well giving the big banks and Wall Street what they wanted. The latter in turn made out very well carrying out the policies of the Federal government. The affirmative mortgages prompted by the Clinton administration under the Community Reinvestment Act set the whole disaster in motion. S&P, a minor player, is being made the scapegoat while all of the rest of the scoundrels, many of whom infest or support the Obama administration, are allowed to escape.

  • De Doc

    And the Obama Administration’s banana republic marches onward!

  • rappini pasta

    Just tell Barry Hussein Soetoro to pound sand.

    • nomoretraitors

      He’s a Muslim lover, so he’d probably enjoy it

  • CaoMoo

    Thuggery at it’s finest. So many anti bullying programs nation wide when the biggest bully is in the oval office sad,

  • Well Done

    Sooner or later the list of wrongdoings from this arrogant gang of looters you call the 0bama administration has to outweigh the mere consideration that they are the government.

  • Habbgun

    Any discussion within conservatives about whether we should follow a Ted Cruz strategy or a cooperate with the Dems strategy the establishment wants should look at this. The question of what S&P does is meaningless. They put a sticker on a stick and you decide if you agree. The outward economy is how we judge risks and this administration has called S&P and said we know that a rational decision by investors runs against our interests. You will change it. There is nothing more telling that you cannot cooperate with these people. They want propaganda for their ends. Nothing more.

  • Dallas25305

    The United States a few years ago an economic and military powerhouse. The nation of freedom that the world looked up to. Now after 5 years of the corrupt, 3rd world style government installed by the Marxist, black power racist Chairman Barack Hussein Obama and his Stalinist henchmen the nation is in an almost unbelievable decline. Political opponents are attacked by the IRS, Obama’s KGB. The EPA at Obama’s order does everything possible to prevent the energy following that might revive the nations economy. Obama like any King or Dictator decides which laws he will enforce and those he will not. His racist Henchman the “Coward” Eric Holder runs an injustice system so corrupt that it would make the Mafia blush. While whites, Asians and White hispanics have no civil rights to protect them from black ‘Sucker Punch Gangs”, blacks are protected by civil rights laws even if they start the attack. Hello Trayvon. The Peoples Liberal Socialist Democrap uses 3rd world style voter fraud to stay in power. Some black districts have more people vote than live in the area. The Democraps say blacks are not smart enough to be able to apply for a photo voter I.D. They encourage Mexicans to register to vote even though they are not citizens because they know they come from a Socialist country. As a foreigner looking at your country with disbelief I can see this. Why can’t more of you because if this is allowed to continue it will get a thousand times worse.

    • MLCBLOG

      Some of us are actually working very hard to make a difference in all this. I love it when you guys from other countries chime in!!

  • Myrtle Linder

    Liberal antichrist = BULLIES, LIARS, HATERS OF ALL THINGS CHRISTIAN OR GOOD FOR OTHER PEOPLE, EXCEPT FOR THEMSELVES.

  • SoCalMike

    the Thug in Chief once again using the government as is personal weapon to go after critics and political opponents. And the democrats are fine with it.
    When is Obama and the “Justice” Department going to start rounding up their critics and throwing us into Reeducation Camps?
    I can just hear the Republicans now calling for one of their phony “investigations”…

  • nomoretraitors

    The two most corrupt officials in the history of the US together in one photo

  • nomoretraitors

    “No doubt it is sheer coincidence that one of Moody’s owners is Berkshire Hathaway, a firm run by outspoken Obama supporter Warren Buffet”
    If there’s anyone who believes that, I got a bridge in Brooklyn I’d like to sell ya, dirt cheap

  • NAHALKIDES

    Let’s hope the lawsuit goes forward and Tim Geithner is forced to give a deposition explaining what that conversation with Obama is about. Unfortunately, DOJ will probably drop the suit rather than risk the truth coming out – that Obama ordered the retaliation against S&P.

    • MLCBLOG

      So obvious!!

  • Long Ben

    All they that espy and descry the Emperors nakedness must be impugned at every juncture. The Emperors agents will be sent forth to eat out their substance and if possible those with the eyes to see and the courage to speak can be sent to his Majesties’ dungeon or Gulag.

  • DontMessWithAmerica

    The fact that these hoodlums are still walking free tells us that America has lost its sense of justice, its guts and its mind. It makes the Egyptians and Ukrainians look so much more honorable and heroic. Sad, sad, sad.

    • Phil

      Where is OUR general Al-Sisi?

    • Obama_Lies

      Corporations and Banksters control the spineless thugs in Congress. Until we clear the Senate, and the House, filled with career politicians that don’t care what goes on as long as they are bankrolled by the corporations and bankers, then we have no hope. Once we clean house, then we need to work on some Amendments, like Corporation Size! Get rid of these companies and bankers that are “Too Big too Fail” because they are the ones that are running the show! They are dictating which countries to invade, all to plunder their natural resources, replace their gold-back currency with the IMF phony paper, and enslave their farmers with Monsanto’s chemical fillled seed contracts. They did the same thing to Iraq, Afghan, Egypt, Libya, and soon Syria and Iran. Who cares if they are in bed with Neo-Nazi’s and Terrorists, as long as they get someone in power that they can bribe.

  • trapper

    They won’t be in power forever. What goes around comes around.

  • kasandra

    Gee, between using the machinery of government to harass his political opponents, playing golf, constant campaigning, and watching cable television series, it’s amazing our president has time for anything else. Oh wait…..

  • Matthew

    Lol,,,enjoying every minuet of what this Incompetent does. Why ??? I’ll tell you why. Because the same people who trusted this lier and deceiver and put him in office are getting what they justly deserve. The truth was out there ,but they refused to believe it. Now they are paying a terrible price for their act of lunacy .
    CHANGE,,CHANGE IS ON THE WAY !!!! Our Messiah,,,at last,,,.HE’s Here !!!
    At last what ? A nation divided and sold under the law of accusation ? All because this president has a “Pen and a phone” and will do as he wants WITH MY MONEY MY CONSTUTION AND MY FREEDOM ! STAND UP PEOPLE….!!
    Make use of your Senators , Congressman and Representatives in Washington . And if you don’t know who they are, ( Which most don’t ) then do a net search and find out.
    Fill their offices with phone calls ,letters, emails ,text messages and even visits to their offices . At least show them that someone cares about what is going on in our nation.
    The problem is that we live in a “Couldn’t care less ” society. With the attitude that it’s not their problem and if it were it was being handled by our conservative politicians . Unbelievable. And equally untrue . M

  • Lanna

    Proof positive that other organizations are fed up with this government like Standard and Poors. Law Professor Jonathan Turley says the President is going outside the system. He is circumventing Congress, and we are at a tipping point. Our government is not set up to be run soley by the Executive Branch as Holder and Obama are doing. The response from Congress must be before he leaves office! We see Harry Reid’s malignant lieing about people who have had their healthcare insurance cancelled with cancer, or other dehabilitating diseases who’s health is further compromised by Obama care. What kind of people don’t care about lives and continue to push a tyrannical agenda on the people? These people have documented information from doctors and total proof of their treatments being stopped, other health care services and doctors, especially Julie Boonstra from Michigan who has leukemia. The leukemia is in the blood stream, you can see the cancer cells on a microscope. Liars will never prosper!

  • William_Bradford

    Ahlert writes the most compelling articles. Link this to all your emails. These people belong behind bars for a very long time.

  • stringman

    S & P made the same mistake that Gibson Guitars made: Supporting the wrong team. The jackbooted thugs with automatic weapons will will be busting down S & P’s doors soon. Then the IRS will teach them the Tea Party Tango.

  • Hass

    You people have got a truly evil person for a POTUS.

    He’s as bad as Pedo Mo, if anything said or done that didn’t suit him, no one gets away unscathed. And he’s certainly shown that.

  • Obama_Lies

    Chicago Style, Obama Politics! He was doing this even before he went to D.C.!