Probing the S&P Probe

by Kevin D. Williamson

The Justice Department has opened an investigation into Standard & Poor’s and other credit-rating agencies, questioning whether they gave certain mortgage-backed securities over-generous ratings leading up to the crisis of 2008. The SEC already had an investigation open.

Our recently downgraded federal government is hardly a disinterested party in these matters.

So, I have a question for the lawyers around here: Don’t we still have a First Amendment? I am no fan of the credit-rating agencies, but they are in the business of offering their opinions about securities. That’s all they do. They are not brokers or dealers.

The credit-rating agencies have two sources of power: One is reputation (damaged, perhaps mortally, by the mortgage-security fiasco), and the other is law: Certain classes of investors are by law required to hold investments rated by federally recognized credit-rating agencies. If the government thinks that the rating agencies exercise malevolent power, then the obvious solution is to repeal the legislation that made them into a federally chartered cartel. But treating the offering of opinions as illegal surely is the wrong approach.

Am I wrong to think this? What say the lawyers?

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