SEC Puts Standard and Poor’s on Notice for Civil Charges on 2007 MBS

[midnight]

Source: Fire dog Lake

The SEC has told Standard and Poor’s that they may file civil charges over the rating agency’s role in a 2007 mortgage backed securities deal. The formal warning of potential imminent charges, known as a Wells notice, was delivered yesterday.

This warning, thought to be the first Wells notice against a rating agency related to the financial crisis, continues the fallout over Magnetar, the hedge fund which famously created bad securities and then bet against them to make money. The Wells notice specifically cites Delphinus, one of the many Magnetar deals. As Pro Publica notes, Delphinus came up in last year’s Senate Permanent Subcommittee on Investigations report about the financial crisis:

The report, which blamed inaccurate ratings as “a key cause” of the financial crisis, said agencies failed to do due diligence in grading securities and too often bent to the wishes of the banks that paid them. The report also flagged Delphinus as a “striking example” of the failures of ratings agencies, noting that the CDO was downgraded “a few months after its rating was issued.” Moody’s and Fitch, S&P’s main rivals in the United States, had also rated Delphinus and had to downgrade or withdraw those ratings after it went into default in 2008.

Senate investigators also released an internal S&P email chain in which analysts discussed whether to address the fact that about two-dozen “dummy assets” in the Delphinus portfolio were swapped out at the last minute for assets that “made the portfolio worse.” (Asked during congressional testimony about the use of dummy assets, two S&P execs told lawmakers they were unfamiliar with the practice in the CDO business.)



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[RUMMYisFROSTED]

1. Around the edges.

If I had to find a word it would be "weak."

[avaistheone1]

2. I hope this results in more than a hand slap for S&P

I wonder if S&P's downgrading of US Treasuries a month or so ago, was some kind of strategic step on their part to make themselves look better.

k&r

[tcaudilllg]

3. Not enough. Until we see real action, the seige of Wall St. will not end, eh?