We’ve been watching with a certain grim amusement as the federal government tries to come to grips with the massive economic meltdown it helped engineer by standing idly by while bankers fraudulently saddled homebuyers with mortgages they could never repay then resold reams of these notes — which they now cannot seem to locate — to various institutions whose well-being underpins the entire U.S. economy.
We say amusement because it’s taken more than five years for the government to demand accountability in the biggest financial fraud in the history of the world — one that will saddle generations of individuals with underfunded savings accounts, stop small investors from ever investing in “rigged” financial markets, reduce the allure of American homeownership, stanch investment in public infrastructure projects, and devalue the U.S. dollar as the Treasury prints money to prop it up.
All this — and not a single person has gone to jail a single day? You have to laugh, or it will just kill you.
Market-based safeguards were in place to stop this meltdown, we were told. A ratings agency called Standard & Poors was supposed to sift through and evaluate the quality of these mortgage-backed investments.
They did — invariably giving them top ratings that drew hordes of investors like colleges, hedge funds, mutual funds and managed individual retirement accounts. California’s pension fund — and its thousands of retired workers — lost $1 billion in the scam.
Yet as the housing bubble was bursting in 2007, The Los Angeles Times reports, one S&P analyst went office to office serenading co-workers with this ode: “Strong market is now much weaker, subprime is boi-ling o-ver, bringing down the house,” sung to the Talking Heads’ “Burning Down the House.”
Large-scale financial fraud is cute like that.
Government investigators have gathered emails and instant messages they say show S&P was giving rosy ratings to securities the firm knew were about ready to implode.
Executives were obsessed with maintaining good relationships with the banks that paid them to analyze their rotten securities. When those securities began to sour, S&P persuaded their analysts to ignore it.
Not surprisingly, S&P denies wrongdoing. After all, if you take dirt and call it gold, and people believe you, for decades, maybe they’ll still believe you this time. Bad move.
Another bad move was choosing not to settle. The government is said to have wanted $1 billion. While that’s more than the $911 million in profit that S&P’s parent made in 2011, it’s also short hundreds of billions in losses suffered by duped investors.
As the feds go through this process, we want to see as many bankers in orange jail suits paraded in front of judges as we saw unsuspecting consumers ousted from their homes and separated from their savings.
And the next time you see something bearing the label Standard & Poors, remember: Their Standards made you Poor.