E-Mails Reveal S&P Analysts Knew and Joked About the Steaming Pile O’Shit in Those CDOs

For the record, emails are slowly showing the RICO Act was broken. What we need is e-mails between various parties to show collective conspiracy. Then we can put everyone in jail!

“In March 2007, as the subprime mortgage market was collapsing, an analyst at the bond rating agency Standard and Poor’s decided to lighten the mood around his office: According to a federal lawsuit filed against the company late Monday, he went from cubicle to cubicle singing an ode to American real estate.

“Housing market went softer/Cooling down/Strong market is now much weaker/Subprime is boi-ling o-ver/Bringing down the house,” the analyst sang to the tune of Talking Heads song “Burning Down The House,” according to the 128-page complaint filed by the Justice Department. The impromptu show played out “before an audience of laughing S&P co-workers,” the lawsuit says.

That moment of levity stands out as a sign of the differing perspectives on American housing offered by S&P’s bond analysts, depending upon their audience, as described by the federal lawsuit: To the public at large — and especially to buyers of securities constructed of mortgages — all was supposedly wonderful in housing, making mortgage-backed securities rock-solid. But inside S&P, gallows humor reigned — along with the fat profits derived from allegedly looking the other way.

The federal lawsuit, which accuses S&P of misrepresenting the quality of its ratings “knowingly and with intent to defraud,” is seeking $5 billion from S&P parent company McGraw Hill to compensate investors and taxpayers who were hurt when securities that the company had rated highly later defaulted.

In a statement, S&P said it “will vigorously defend” itself against the lawsuit. The company said that its ratings have always “reflected our current best judgments,” a statement it has declared repeatedly since the housing market collapsed, turning the piles of debt it had once branded safe into worthless mounds of paper.

But the picture of S&P painted in the lawsuit — one constructed with a bevy of internal emails — sharply challenges that assertion….”

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