Angry at S&P? Don't bother suing - they enjoy First Amendment immunity

[banned from Kos]

"The problem, however, is that any attempt to sue the credit rating agencies for downgrading U.S. securities will run smack into the Bill of Rights. The rating agencies, as many a disgruntled mortgage-backed securities investor has discovered in the last few years, are shielded from liability because their ratings are considered to be public opinion protected by the First Amendment of the U.S. Constitution."

(hyperlinks embedded in Reuters article)

http://blogs.reuters.com/alison-frankel/2011/08/02/angry-about-possible-u-s-downgrade-dont-bother-suing-raters/

and - just as pertinent concerning the MBS misratings:

"The First Amendment shield has proved to be incredibly valuable to the credit rating agencies in the wake of the 2008 economic meltdown, when court after court has dismissed MBS investors’ claims that the rating agencies worked hand-in-glove with issuers to confer AAA ratings on mortgage-backed dreck."


Don't blame Holder or Obama - the courts have decided (for now).

Good news? Dodd-Frank attempts to remove this immunity. But the CRA's are fighting it, of course.

[no_hypocrisy]

1. Dun & Bradstreet was held liable for defation against a business.

How come S&P can't be sued if it knowingly used wrong numbers to downgrade the U.S. credit rating?


A credit reporting agency can be held civilly liable for ordinary and punitive damages for publishing false assertions about the bankruptcy of a business which is not a public figure.

A credit reporting agency could be liable in tort if it carelessly relayed false information that a business had declared bankruptcy when in fact it had not.

Dun & Bradstreet, a credit rating agency, sent a report to five subscribers indicating that Greenmoss Builders, a construction contractor, had filed a voluntary petition for bankruptcy. The report was false and grossly misrepresented the contractor's financial health. Thereafter, Dun & Bradstreet issued a corrective notice, but the contractor had already been harmed.



http://en.wikipedia.org/wiki/Dun_%26_Bradstreet,_Inc._v._Greenmoss_Builders,_Inc.

[banned from Kos]

2. They should be held liable! Of course.

But there was a silly sermon posted here about how Obama should just go in and "arrest the criminals" like a Western sheriff would in 1874.

How stupid would DOJ look when their charges were immediately dropped citing the First Amendment?

[mmonk]

3. Fraud. That is the angle I would take given their ratings in the recent past

which contributed to the financial meltdown.

[KharmaTrain]

4. And This Would Solve Problems How??

I'm no fan of the credit agencies but this downgrade was both deserved and inevitable. If you dared to apply for credit not only spending way more than you are earning but refusing to "get a job" to earn more revenue, you'd get turned down altogether. I'm surprised this didn't happen earlier. So what's "suing" going to do? Reverse the mess we're in? Hardly.

[alc]

5. don't bother suing unless you can prove they're wrong

that would be hard to prove.
* we spent the last month paralyzed about legislation to help us pay the debt. All sides were saying "we are going to default". Why should we think that in the future we will always come through with a last minute deal and not go weeks or months without being able to service our debt.
* we didn't raise revenue in the "solution"
* we didn't cut military (but we may if the triggers fire)
* we didn't and probably won't have any "real" cuts or revenue increases

Our 10 year budgets (Obama's and the CBO's) say we are going to double debt in the next 10 years. GDP (therefore revenue) is unlikely to increase anywhere near that and our debt is already greater than our GDP. Putting all of that together would you say we are the best borrowing risk in the world (i.e. deserve AAA)

As far as which numbers they used: there are many ways to calculate future budgets. Congress is constantly sighting different ones depending on what point they want to make at the time. It would be hard to win in court saying they used bogus numbers when they can show congressmen using the same numbers and the CBO providing "alternative" scorings of a bill based on the same assumptions/calculations S&P used.