etter late than never, said John Cassidy at The New Yorker. Ever since the housing crisis hit, people have clamored for the authorities to hold rating agencies accountable for giving prime ratings to toxic subprime mortgage securities. This week, finally, the Justice Department filed a $5 billion fraud suit against Standard & Poor's, the largest U.S. rating agency, charging that it defrauded investors by issuing ratings it knew to be misleading. It's tough to predict how this case will turn out, of course. "I, for one, wouldn't dismiss S&P's chances of beating the rap." But the Justice Department's bold move shows the initiative its critics have demanded for so long. I just wish this weren't such an exceptional development, said Michael Hirsh at National Journal. "It's been four years since the financial crisis, and no Wall Streeter has gone to jail or even paid out a penalty severe enough to cost him his palace in the Hamptons." The question now is whether the Justice Department will stick to its guns and "force S&P to admit its wrongdoing formally."
The S&P case is unique for several reasons, said Jason Breslow at PBS. The government is seeking by far "the largest penalty to stem from the financial crisis," and reportedly pushing hard for an admission of guilt. Still, it's hard to tell whether prosecutors are really starting to punish white-collar crime more aggressively. "I never know whether to applaud a new case or be somewhat suspicious the department hopes to score just enough points to manage public perception," said Jeff Connaughton, author of The Payoff: Why Wall Street Always Wins.
The lawsuit is also uniquely awkward, said James Freeman in The Wall Street Journal. While one federal agency — Justice — is suing S&P, another continues to endorse it. To this day, the Securities and Exchange Commission requires institutions to follow the advice of government-anointed credit raters, including Moody's, Fitch, and — you guessed it — S&P. "Before suing a company for $5 billion, shouldn't the government at least stop mandating its products?" The timing and target of this case are also disturbing. S&P's attorney said the federal investigation seemed to "rev up" after the rating agency downgraded the U.S. government's credit rating following the 2011 debt-ceiling crisis. Instead of seeking "downgrade payback," the government should tell the SEC to stop guaranteeing business for these agencies. Americans will "benefit most when few people care how the rating agencies operate, because their judgments won't be that important."
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- Why I'm a pro-life liberal
- 31 TV shows to watch in 2014
- He said he was leaving. She ignored him.
- If a nuclear bomb exploded in downtown Washington, what should you do?
- Why we can't stop procrastinating, according to science
- What would a U.S.-Russia war look like?
- Israel and Russia are getting along. Have the neocons noticed?
- How Ukraine can fend off the Russians, in 7 simple steps
- These stunning travel photos remind us that we're all just amateurs with iPhones
- How to make homemade marshmallow Peeps
Subscribe to the Week