APPEARANCES, GENTLEMEN, APPEARANCES – AT 7:07 A.M. ET:  Standard & Poor's recently downgraded the credit rating of the United States for the first time in our history.  Now S&P is under investigation by the Justice Department.  From The New York Times:

The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.

The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.

COMMENT:  No matter how you spin this, it leaves one with a sour taste.  This is the kind of story you usually read in a dictatorship, or in a city dominated by a boss-run political machine. 

The investigation may be entirely proper, indeed possibly overdue.  But the appearances are awful.  This simply looks like retaliation, the political equivalent of a gangland hit.   A kind of financial St. Valentine's Day massacre.

Oh, didn't the St. Valentine's Day massacre take place in Chicago?  And didn't the president come from..?  And didn't his chief of staff come from..?  And his political advisers?  And his wife? 

Oh, I'm dreaming.  But, you know, you hang around, you learn.

This calls for more reporting.  Frankly, I hope the probe is legit, as there are many proper questions about the rating of the mortage market in the time leading up to the mess of 2008.  But the appearances are still rotten.

August 18, 2011