The press recently reported (click here for the WSJ story) that DOJ is joining the investigation of S&P for its shady practices of rating the very folks who pay its bills. Below is what I imagine to have transpired in an initial conversation between investigators and S&P officials.
S&P Vice President for Compliance: Come in guys. Sorry the coffee is cold and the pastries are a bit stale. We’ve been expecting you for, well, the last few years. Were the directions we gave you a little tough to follow? Should have used Google maps?
DOJ Prosecutor: No. It’s all good. Frankly, we were going to give you a pass (wink nod). Just too complicated. We like easier cases. But then you went ahead and downgraded US Treasury Bonds. That did not play well at the home office.
S&P Vice President: Yeah, I guess it was not the time to get righteous. So how long will your team need to be around?
DOJ Prosecutor: I guess that depends. Now that the press is on to the investigation, we have to make a show of it. And look, from what we know, you guys made over $2 billion (with a b) dollars rating these CDO; that’s a little too much to ignore.
S&P Vice President: And how bout the SEC? What about their investigation?
DOJ Investigator: Oh, those guys? Ha! Trust me, they need all the help they can get.
S&P Vice President: Do you think anyone is going to jail?
DOJ Investigator: Nahhhh. We get it. You guys bend over backwards for the Wall Street firms so that your friends over there are happy and well fed – and in return when your kids near college you move over to take a lucrative seat on the other side of the table. And so it goes. (The old you scratch my back, I’ll scratch yours). If we were going to prosecute folks for that kind of behavior, Wall Street would be empty. We’d have to let out all the drug dealers and addicts to make room in the prisons.
S&P Vice President: Hey thanks, we’ll bring in some fresh coffee … and if your daughter needs a summer a job, make sure to use my name.