The U.S. is seeking as much as $5 billion in penalties from McGraw-Hill Cos. and its Standard & Poor’s unit as punishment for inflated credit ratings that Attorney General Eric Holder said were central to the worst financial crisis since the Great Depression.
S&P rated trillions worth of securities in the mortgage backed and collateralized space during the frothy market. Is it their fault the market took the dive it did? Probably not. Did they make millions on the issuance of ratings? You bet!
It will be an interesting time for ratings agencies, especially if the US is looking for $5 billion in fines… Maybe as the agencies contract or get reworked, community investing might gain. There might not be any agencies left to rate investments, so due diligence could be knowing whats going on with your own investments by looking around your neighborhood. Stay tuned… and don’t invest in anything complicated based on a rating alone.