Time To Rate Regulators’ Potential Settlement With A Ratings Agency

Yahoo Finance reports that Standard & Poor’s Ratings Services is nearing a settlement with regulators over how it rated mortgage-backed security bonds before the financial melt-down.

You know, those securities that almost took down the global economy because some of them had “AAA” ratings, because apparently a bundle of sub-prime mortgages was considered to be “AAA” in 2008.

So how much might S&P have to pay? Reportedly “at least” $60 million dollars.

This leads to the question: what rating should this possible settlement be given? Well that depends who you are:

1. McGraw Hill Financial Inc. shareholders – “AAA” Because the company which owns S&P apparently has $1.92 billion in cash, according to Yahoo Finance.  Also, why not give everything a “AAA” rating, as apparently if the world economy almost collapses, you may have minor consequences five or six years later.

2. People who lost their money or homes. – “D.” “Why wouldn’t these people give it an ‘F?'” you may ask, “that’s a failing grade, right?”

Nope – nobody gets an ‘F’ at S&P. ‘D’ is the lowest rating. Maybe this is part of the problem by ratings systems not designed by school teachers that rate securities sold to pension plans of school teachers.

3. Moody’s Investors Service. – “C.” Good old Moody’s doesn’t give ratings lower than “C.” And we wager they would give this settlement a “C” because they would rather ratings agencies pay less if such a financial crisis ever happens again.

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Categories: Mildly Bad News

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