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Former S&P analyst Richard Larkin argues S&P may have violated its 'outer circle-inner circle' rule.
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Women filing a lawsuit against -- imports bringing the youth renewed focus.
To be an actor ratings of the sub prime mortgage securities that helped trigger the financial crisis here with the latest as Fox Business senior correspondent Charlie Gasparino started especially -- Especially this is Dick Clark and former S&P analyst -- before if you Dick I wanna lay out a couple.
Things here just so we have a context of -- way to do it Justice Department's donors and obviously.
Missed a lot of range during the sub during the sub prime prime sub prime crisis those bonds blew up.
DOJ from what we understand this is what sources -- -- the Fox Business Network we'll try to prove that -- -- Why is this important -- the Supreme Court has ruled at least some one precedent that the First Amendment defense which is what as some people say it's our opinion.
Is -- if you violate your -- that we -- your own criteria we should also point out that.
The Justice Department has been looking at this for several years what do you have to say about interviewer role in the belly of the -- Something he has never lost the lawsuit on its ratings from what I understand and again their defense was the First Amendment.
From -- understand about that this lawsuit and and and Department of Justice is their biggest.
And their biggest opponent -- now they have deeper pockets than anybody else.
And my guess is it might have to do with what we what we call the concept that hasn't paid -- inner circle in the outer circle.
Was at zuccotti oblivious spectrum was this a concept of this part of their criteria -- -- not only -- criteria used -- drilled -- analysts -- outer circle was.
Outside observers people who bought bonds.
S&P was an outside observer.
The inner circle with a people who were selling -- -- issuers the bankers the investment bankers.
Who were basically structure in the deals -- S&P always said we were in the outer circle.
I get the feeling based on what I've seen in terms of -- emails and text messages that that breach between the inner circle in the outer circle were S&P was supposed to be.
I get the feeling DOJ believes that was breached.
OK now let's widen that -- you were in the municipal bond department a different department then -- that was structuring these deals -- -- structured finance department.
In the structured financing of those who put together those chartered Lebanese department at S&P was the biggest money maker -- -- did you by far huge money invested -- him.
Much more than that and it in other -- is because complex was -- the business what are your journey -- journey to doubt your 2000 run up to the French Fries but here's the interest you think.
If you're -- on a structured finance I know this was analysts I spoke with a lot of these.
These guys -- above these deals you are actually part of the deal you worked.
With the banker with the issuer you kind of dealt with them.
About how -- get that triple -- rating which was so important to sell a mortgage backed security or credit or or collateralized debt on.
-- -- right there the analysts were always involved with the issuers and the bankers on any rating weather was municipal deal that I was working on or be structured deal but.
You drew the line it said here's the information.
We'll look at it he came back with the rating if they didn't like the rating was hoping to get harder rating.
They weren't told this is what you do to get a higher rating they were saying.
Here's what the problem is this is why you rated as low would you war.
This is what's stopping you from getting a higher rating if you address that.
Will considerate and I what I understand in terms it emails and texts going back and forth between analysts.
There were direct negotiations saying.
Not so much that.
You're not doing what you need to do right.
For more long lines of this is what you have to do here's the road map to get to where you went to do OK I and that and so you're that you're eighty you're just that's what happened.
And that's based on what I'm get well.
Sounds -- it sounds like.
That inner circle outer circle thing was breached I think that's what -- call for a kick in in -- S and p.'s defense.
You know.
Looks a little fishy here.
This is the one for the one -- that downgraded the US government.
They're not the only greater that did that did did -- crummy stuff during the run capsule right right at doesn't this look fishing do I mean.
Did the government I don't wanna raise questions why are they going -- recipe in way to going back Moody's.
Not Moody's and -- Fitch.
President.
Again maybe a bias has been a leader in care terms of telling people.
This is what we do.
This is how we do it they've been very open more than the other two rating agencies and I think the reason DOJ's going if there's because they've been -- so -- saying.
This is our rules -- -- criteria.
As it that DOJ can look at that and say we think now we've -- Q and something you said you were doing it now you're not.
We should point out the DOJ has been working on this case from -- -- this from a source that's that's it that's an advisor to the government.
For several years now they've -- clearly looking at the rating agencies following the financial crisis.
They think they now you know just because the other ones didn't get charged it means that doesn't mean it won't -- charged.
But these they seem to think this is the best case they got.
Because this is the first case to bring it.
Like what you do though is this.
The bankers would go around to various rating agencies and say.
-- you don't give us a AAA on this I'm taken it to this guy they would they would play each one of them against each other.
Don't they deserve some of the blame here as well as the -- -- If that's what happened yes I can tell you from my own expense that's that we happen immediately rating shopping current personal municipal -- was always a lower key much smaller much already volatile story no one ever said to me.
If I don't get a rating from you'll won't somebody else in that they -- -- didn't matter the rating would slow saying here's a -- gets the feeling I get the feeling again from reading the write emails and text emails.
That have come out.
That.
S&P.
And and others.
We're making decisions.
Based on we need to keep this business.
-- I see going on no I wasn't by air but.
And we had a big we should emails and text males are damaging we should we and we should point out that you know in excess indicated forget about Muni bonds and structured finance three rating agencies did matter.
Fitch was a major player guess you could -- -- among the -- among the three let me just.
Make this this of -- point put this in historical context.
I covered municipal bond market for a while I do -- metric -- haven't met each other many years ago unfortunately.
You know.
-- New York City and financial crisis have in the mid seventies there was a major investigation congressional investigation and these securities exchange commission investigation.
Of standard reports at that point correct absolutely I just started right when that was happening OK the is this the biggest case since then yes.
Absolutely.
-- we -- I expect he'll tell.
