Standard & Poor’s, the Wall Street rating institution whose integrity already was questioned a few years ago, has decided that securities backed by subprime home loans deserve a higher rating than bonds issued by the federal government.

 

That’s right, subprime loans—the same securities that led to the 2008 financial meltdown.

 

S&P’s decision involved giving AAA grades to 59% of Springleaf Mortgage Loan Trust 2011-1, a set of bonds linked to about half a billion dollars loaned to homeowners with virtually no equity and below-average credit scores, according to Bloomberg.

 

The move followed S&P’s stripping the U.S. of its top rating in early August, while Democrats and Republicans bickered over how to raise the debt ceiling.

 

S&P’s reputation took a beating after the financial crisis, as media reports told how the firm accepted payments from investment houses while issuing high ratings for their bonds, which in turn contributed to $2 trillion of losses for major financial institutions.

 

“Standard and Poor’s decision to downgrade our public debt tells us absolutely nothing about the probability of the federal government meeting its future obligations,” wrote Joshua Holland of AlterNet. “The move really only offers us some compelling evidence of the corruption eating away at the foundations of yet another key Wall Street institution.”

-Noel Brinkerhoff

 

Subprime Mortgage Bonds Getting AAA Rating S&P Denies to U.S. Treasuries (by Zeke Faux and Jody Shenn, Bloomberg)

How to Think About Standard and Poor's Downgrade (by Dean Baker, Huffington Post)

Standard and Poor's: Just More Corrupt Wall Street Insiders Waging Class War on America (by Joshua Holland, AlterNet)