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02:13 PM on 02/05/2013
MORTGAGE-BACKED SECURITIES WERE NEVER MORTGAGE BACKED...only COLLECTION RIGHTS were transferred in the subprime...no funding...no m in mbs. NOTHING WAS EVER PUT INTO THE MBS. NO LOANS. Only collection rights...can you say massive PONZI?
That means all the foreclosures are ILLEGAL.
02:08 PM on 02/05/2013
Did I read that this legal action may get S&P to cough up a mere $5 billion? Is this front page stuff? I smell more hip faking by BO and his Valet, Holder. BO can't prioritize Holder to bring the Ft. Hood murderer to trial, or cough up the myriad hidden documents for Fast and Furious, but he can make sure he gets some media compliments for this old issue? Nobody does hip fakes like BO. His sheep are bleating 'our God gonna 'bin' those rich guys, huh, Timmy?'
01:50 PM on 02/05/2013
Justice delayed is justice denied... This ship should have sailed some time ago!
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Human1984
Old Angry Liberal Patriot
01:37 PM on 02/05/2013
No one is above the law, not even the Wall Street executives. At least they should not be above the law! These rascals that caused the financial meltdown and devaluation of our homes have to be held to account. The damages incurred have been severe and massive!
There is no justice in America until the "banksters" are behind bars!
01:21 PM on 02/05/2013
“securities made of risky subprime mortgages”

A high risk of a borrower defaulting on a loan does not necessarily make the loan itself risky. If a pawn shop gives a loan on someone’s Rolex; the pawnbroker does not care if they ever repay the loan since he can always sell the Rolex. Similarly, mortgages are secured by the house that is mortgaged. If lenders believed that house prices could not decline; then it seemed perfectly safe to give mortgages to subprime borrowers. If the borrower defaulted, the lenders just foreclosed and sold the houses for enough to cover the mortgage loans and foreclosure costs.
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labrown
Studio Musican/Composer
01:34 PM on 02/05/2013
However in this case the banks were NOT "the lenders". They were merely the broker. Wall St investors were the real lender and in most cases the bank not only failed to put a penny into the deal but was already paid in full for the loan amount on top of it. This is the highest level of graft and corruption and the greatest rip off in the history of the world. THAT is precisely why they had to forge millions of notes. Did you think "they lost them" or they fell behind the filing cabinet? The original note was fraudulent from beginning when they misrepresented themselves as lenders on loan docs and inflated appraisals to the end when they forged notes they were never legally entitled to never having lent a penny.
01:21 PM on 02/07/2013
Where anywhere in this post did I claim that the banks were the mortgage lenders? It depends on whether “lenders” means the issuer, the servicer or the ultimate money source. “Top 5 Mortgage Lenders By Dollar Volume For 2008”
www.therealestatebloggers.com/mortgage/top-5-mortgage-lenders-by-dollar-volume-for-2008/
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04:42 PM on 02/05/2013
It hasn't worked out that way walstir.Housing values dropped so quickly after the meltdown that banks and mortgagers had no shot at recovering costs.That's why banks were once purposely divided into investment banks and savings and loans.It was to keep the risk away from depositers or borrowers.We need to go back to that structure so that investment banks can be allowed to fail without taking down the entire system.
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VANDERGRAAFK
Teacher
01:51 PM on 02/06/2013
If you advocate a return to Glass-Steagall, you should be compelled to explain how Glass-Steagall would have prevented the financial meltdown. To the extent that banks would have not been allowed to use insured deposits to fund their investment branches, Glass-Steagall would have helped. No "too big to fail" bank would have been allowed to have consumer and investment banking under one house.

However, what happened in this regard - the failure of CDOs abetted by poor ratings firms' due diligence - would not have been affected one bit by Glass-Steagall. Bear Stearns, Lehman, etc. were all investment banks that got clobbered by the CDO nonsense. Maybe had a proactive government required ratings firms to be certified before lending their reputations to cover fraudulent securities the problem could have been lessened. But, as we know too painfully well, Wall Street and the quants have usually been two or three steps ahead of government regulators in devising products that many do not understand.
01:17 PM on 02/07/2013
Clearly it hasn’t worked out that way and I didn’t claim that it had. What I did write was: “If lenders believed that house prices could not decline; then it seemed perfectly safe” - note the conditional “if” and the dependency on what “lenders believed” creating a situation that “seemed” perfectly safe. Beliefs can be mistaken and appearances can be misleading.
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clearasmud
Needed... One Real Democrat President
01:19 PM on 02/05/2013
Multi-Million dollar Bonuses, and all they had to do was take chances with other peoples money.
03:15 PM on 02/05/2013
Not to mention the lives of all those who have lost their homes in the process. Shameful!
01:18 PM on 02/05/2013
It's about time S&P gets what their greed and complicity in the financial collapse deserve!
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corte33
01:17 PM on 02/05/2013
Soon we might have some of those billionaires going to prison?????
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jerich4
01:05 PM on 02/05/2013
"Hindsight is no basis to take legal action against the good-faith opinions of professionals," the company said. "Claims that we deliberately kept ratings high when we knew they should be lower are simply not true," it said.

Isn't like ALL legal action taken in hindsight, (except for maybe the Blago case, explaining the mess it was). Last time I checked we didn't have an active pre-crime division of the FBI or DoJ. Which by the way seems interesting because didn't S&P downgrade the US credit rating over Washington politics, on the assumption the debt ceiling wouldn't get resolved even though it did back in 2011. Fascinating reaction there.
01:39 PM on 02/05/2013
Clearly S&P is not attempting to argue that legal cases cannot be launched after the events that form the basis for the cases. S&P is arguing that information that becomes available after the events cannot be retroactively used to criminalize “good-faith opinions” arrived at earlier when the current information was unavailable. The prosecution will have to legally establish that the earlier S&P views were not, in fact, “good-faith opinions”. That can be legally challenging.
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jerich4
03:30 PM on 02/05/2013
And how often has the "based on what we knew at the time" or the "left hand not knowing what the right hand was doing" argument ever kept someone or a company from getting crucified in a court, let alone what will happen in the court of media opinion if FOX and MSNBC get into it over this.
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jerich4
03:31 PM on 02/05/2013
I mean that may survive them in a criminal case yeah, but a civil case, I am not so sure.
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studentMD
Christian, Ind. Progressive, Former NCO - USAF
01:01 PM on 02/05/2013
Whoa DOJ finally going after criminals...
06:30 PM on 02/05/2013
No, there will be no jail time for anyone involved - at least not from this suit. This is a civil suit - just for money. Gov't should go after the criminals involved, no doubt about that in my mind, but don't hold your breath.
12:59 PM on 02/05/2013
“Many securities made of risky subprime mortgages got high ratings”

The article omits any mention of the concept of tranches (or slices) of CDOs. Only a portion of any security made of risky subprime mortgages actually got high ratings. From: “CDOs And The Mortgage Market”
www.investopedia.com/articles/07/cdo-mortgages.asp#axzz2K30RKQfy

“all the cash flows from a CDO's collection of assets {mortgages} are pooled together. This pool of payments is separated into rated tranches. Each tranche also has a perceived (or stated) debt rating to it. The highest end of the credit spectrum is usually the 'AAA' rated senior tranche. The middle tranches are generally referred to as mezzanine tranches and generally carry 'AA' to 'BB' ratings and the lowest junk or unrated tranches are called the equity tranches. Each specific rating determines how much principal and interest each tranche receives. The 'AAA'-rated senior tranche is generally the first to absorb cash flows and the last to absorb mortgage defaults or missed payments. As such, it has the most predictable cash flow and is usually deemed to carry the lowest risk. On the other hand, the lowest rated tranches usually only receive principal and interest payments after all other tranches are paid. Furthermore they are also first in line to absorb defaults and late payments.”
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VANDERGRAAFK
Teacher
05:47 PM on 02/06/2013
That is true. And, the article did fail to make these distinctions. However, the last of these CDOs offered before the collapse may not have even been worthy of AAA for the top tier tranche. Some of these investors are experiencing losses. Second, the lower tranches, though riskier, may not have even deserved the AA and BB ratings. The BB ratings were clearly in the area of junk bonds and proved to be just that: junk. AA, however, implies an investment grade rating that is a bit riskier than AAA, but is not anywhere near the status of junk. Even those AA ratings - in retrospect - are highly questionable and demonstrate that S&P, Fitch and Moodys had no idea what they were valuing. As I cited in a different post, S&P will be evaluated on whether they knowingly misrated securities because of a) a failure to conduct due diligence or b) an outright fabrication of ratings. In other words, S&P may well have known that ratings given were complete rubbish and issued knowingly false ratings in order to lock in business.
12:57 PM on 02/05/2013
It is about time the Fed's finally pursued this. There is no question that the 'Rating Agencies' are culpable and as guilty as the banks who originated these doomed mortgages. To say there wasn't (and still isn't) collusion between issuers and raters is nonsense. I'm sure a settlement will be reached before a court date as the potential liability of an adverse decision could conceivably bankrupt S&P.
12:56 PM on 02/05/2013
When there are no consequences other then fines it will never stop.
12:54 PM on 02/05/2013
Everyone new over 4 years ago that their rating were fraudulent aggressive ratings and that people lost fortunes from their lies.

Eric Holder should of been replaced and tossed our two years ago. Democrats do not like his lack or no leadership role in his position.

Of course there will be NO criminal prosecution and jail time for anyone because it is a multi billion dollar fraud and those only get fined
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pjwertz
12:40 PM on 02/05/2013
In keeping with the invertebrate "Justice Dept." approach to Wall Street and banksters, we can expect S&P to be fined a week's pay.
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VANDERGRAAFK
Teacher
05:52 PM on 02/06/2013
In the end, your cynical view may prevail. In the meantime, please note that S&P rejected a proposed settlement that would have cost them $1 billion, an amount nearly equal to the total profits achieved by McGraw-Hill (of which S&P is a division) last year. That seems a rather substantial penalty for the past and a penalty that could have repercussions for the future. I suggest you think about what happened to Arthur Andersen then one of the top 5 accounting firms. Its lack of due diligence and its turning of a blind eye to all the questionable Enron practices led to the dissolution of that Big 5 accounting firm.