S&P Admits in Court That Its Ratings Are Ridiculous and No One Should Ever Take Them Seriously

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Today, you should give thanks that you aren’t the attorney who has to defend Standard & Poor’s from charges that it misled investors about the objectivity of its bond ratings. Here’s their defense:

It’s true that courts have long allowed sellers to engage in what’s called “puffery.” If McDonald’s says they make the world’s best hamburgers, that’s OK. It may be a ridiculous claim, but what do you expect them to say? “Our burgers are pretty good if nothing else is available”? Basically, you’re allowed to make vague claims about your greatness without inviting lawsuits from folks who don’t like your burgers.

So when S&P says they use “market leading software,” they’re probably on firm ground. That’s standard puffery. Unfortunately, “transparent,” “independent,” and “objective” are a little trickier. Those words have actual meaning, and there’s only so far you’re allowed to stretch them. When your bond ratings are secretly based on the fact that bond issuers are paying you heaps of money for inflated scores, your claims of mere puffery are a lot less likely to succeed.

But hey! There’s no harm in trying. Well, there’s no harm aside from the endless mockery this defense is producing. After all, S&P is basically saying, sure, our ratings are completely meaningless because we just produce whatever rating the bond issuer pays us for, but everyone already knows that. Only a fool would ever have believed anything else.

Should be a fun trial.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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