The problem with Rating Companies are that their ratings are mandated by Congress and GAAP, even though the "rating" is paid for by the issuer and just an "opinion" that can make a company, determine your credit worthiness, and ultimately the way you live.
Example: suppose you have a credit card that has a low borrowing limit of $2000. You have an outstanding revolving credit of $1800, which you pay off every month, never a late fee or purchased over your credit limit. You also have the ability to have a much higher credit limit of $10,000 but you have declined their offer because you are fiscally responsible and see no need for higher amounts. I on the other hand, take the increased credit limit. All else being the same. WHICH one of us would have the better credit rating. ??
I think the case should be dismissed. S&P ratings are opinions. Unless they hid something , there is no basis for fraud. Merely being wrong in your opinion is not fraud.
Keker asked Carter to dismiss the government’s case, which seeks as much as $5 billion in civil penalties, on the grounds that the Justice Department didn’t adequately support its allegations that the company defrauded federally insured financial institutions by knowingly understating the credit risks of securities linked to residential mortgages.
S&P said in its request to dismiss the case that the government can’t base its fraud claims on S&P’s assertions that its ratings were independent, objective and free of conflicts of interest because U.S. courts have found that such vague and generalized statements are the kind of “puffery” that a reasonable investor wouldn’t rely on.
