SEC to S&P: Nice Ratings Agency Ya Got There...

Alternative headline: SEC seeks to kill the messenger:

The staff of the Securities and Exchange Commission is considering recommending civil legal action against the Standard & Poor’s debt ratings agency over its rating of a 2007 collateralized debt offering.

Collateralized debt obligations[cnbc explains], also known as CDOs, are securities tied to multiple underlying mortgage loans. The CDO generally gains value if borrowers repay. But if borrowers default, CDO investors lose money. Soured CDOs have been blamed for making the 2008 financial crisis worse. Ratings agencies have been accused of being lax in rating CDOs.

The SEC staff said it may recommend that the commission seek civil money penalties, disgorgement of fees or other actions.

S&P has been under fire for its recent downgrade of U.S. debt, as well as several bad calls it made leading up to the financial crisis and economic meltdown that began in 2008. The unit’s president stepped down last month.


It’s fair to say that, after nearly three years in office, we have an established modus operandi for President Obama. He talks a moderate game when it suits him, and he talks a more fierce leftist game when he thinks it helps or he can get away with it, he has no lasting interest in legislation and therefore doesn’t work well with Congress, but uses his executive powers to push every federal agency toward his pet causes. The NLRB and National Mediation Board are helping Big Labor, and the Department of Labor itself seems to have taken up that cause too with its latest rule regarding business lawyers and client confidentiality. The EPA has gone after the energy sector in a big way to force the nation to change over to “green” energy, and the stimulus money has been used to put huge piles of taxpayer money at risk to prop these green companies up.

And when his economic transformation schemes run afoul of real world economics and an agency downgrades US credit — well, then, Obama’s SEC goes after that agency both to shut them up and warn others away from following S&P’s lead.

As for why Obama doesn’t care much for the legislative process, I can think of two explanations easily enough. One, he just isn’t a detail oriented person. His flighty career prior to the presidency strongly suggests that he gets bored easily and isn’t one to personally invest too much in any single effort. And two, he does understands better than most that his ideas are off on the far left and aren’t popular. Backing legislation that promotes his ideas openly would not only get him nowhere, but would expose his true radical nature. It’s far easier to just use personnel as policy and stock the executive branch agencies with fellow leftist travelers who will pursue the left’s agenda. So that’s what he’s doing.



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