Difference between revisions of "Standard & Poor's Corp."

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On November 5, 2012, the Federal Court of Australia ruled that S&P and [[ABN Amro]] "deceived" and "misled" 12 local Australian councils that purchased triple-A rated products called [[constant proportion debt obligations]] in 2006. The ruling marked the first time a credit ratings agency had been brought to a full trial over a structured finance product.<ref> {{cite web|url =http://www.ft.com/intl/cms/s/0/175c63be-26fb-11e2-9295-00144feabdc0.html#axzz2BMoH4e2r|name = S&P found guilty of misleading investors|org = FT|date = November 5, 2012}}</ref> <ref> {{cite web|url =http://jlne.ws/SO8mZ9|name = Councils win landmark case against Standard and Poor's, ABN Amro|org = The Australian|date = November 5, 2012}}</ref> At the time, it was thought the Australian court's ruling could open the ratings agencies to further cases in Europe.  
 
On November 5, 2012, the Federal Court of Australia ruled that S&P and [[ABN Amro]] "deceived" and "misled" 12 local Australian councils that purchased triple-A rated products called [[constant proportion debt obligations]] in 2006. The ruling marked the first time a credit ratings agency had been brought to a full trial over a structured finance product.<ref> {{cite web|url =http://www.ft.com/intl/cms/s/0/175c63be-26fb-11e2-9295-00144feabdc0.html#axzz2BMoH4e2r|name = S&P found guilty of misleading investors|org = FT|date = November 5, 2012}}</ref> <ref> {{cite web|url =http://jlne.ws/SO8mZ9|name = Councils win landmark case against Standard and Poor's, ABN Amro|org = The Australian|date = November 5, 2012}}</ref> At the time, it was thought the Australian court's ruling could open the ratings agencies to further cases in Europe.  
  
On February 5, 2013, the Department of Justice sued S&P for fraud in rating mortgage-backed securities during the years leading up to the financial crisis. The Department of Justice, filing a civil in Los Angeles, the Department of Justice accused S&P and its parent company [[McGraw-Hill]] of three types of fraud.
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On February 5, 2013, the Department of Justice sued S&P for fraud in rating mortgage-backed securities during the years leading up to the financial crisis. The Department of Justice, filing a civil lawsuit in Los Angeles, accused S&P and its parent company [[McGraw-Hill]] of three types of fraud. The motive, according to the lawsuit, was to collect fees from firms that were pooling risky home loans into securities. <ref> {{cite web|url = http://www.bloomberg.com/news/2013-02-05/u-s-files-lawsuit-against-mcgraw-hill-standard-poor-s.html|name = Holder Cites `Egregious' Conduct by McGraw-Hill, S&P|org = Bloomberg|date = February 5, 2013}}</ref> <ref> {{cite web|url = http://money.cnn.com/2013/02/05/news/economy/sandp-subprime-lawsuit/|name = U.S. sues S&P over subprime ratings|org = CNN|date = February 5, 2013}}</ref>
  
In a statement, the Department of Justice claimed that several investors, who were also federally insured institutions, lost billions of dollars on CDOs for which S&P issued inflated ratings that misrepresented the securities' true credit risks. The 128-page lawsuit also contains a parody of "Burning Down the House" by Talking Heads. According to the lawsuit, an unidentified S&P analyst, listed in the complaint as "Analyst D", wrote a parody of the song and emailed it to friends. He later sent a video of himself singing and dancing to the song while entertaining coworkers.<ref> {{cite web|url = http://www.bloomberg.com/news/2013-02-05/u-s-files-lawsuit-against-mcgraw-hill-standard-poor-s.html|name = Holder Cites `Egregious' Conduct by McGraw-Hill, S&P|org = Bloomberg|date = February 5, 2013}}</ref> <ref> {{cite web|url = http://www.justice.gov/opa/pr/2013/February/13-ag-156.html|name = Department of Justice Sues Standard & Poor’s for Fraud in Rating Mortgage-backed Securities in the Years Leading up to the Financial Crisis|org = Department of Justice|date = February 5, 2013}}</ref> <ref> {{cite web|url = http://www.chicagotribune.com/business/breaking/chi-us-suit-against-sp-includes-talking-heads-parody-20130205,0,2127511.story|name = U.S. suit against S&P includes Talking Heads parody|org = Chicago Tribune|date = February 5, 2013}}</ref>  
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In a statement, the Department of Justice claimed that several investors, who were also federally insured institutions, lost billions of dollars on CDOs for which S&P issued inflated ratings that misrepresented the securities' true credit risks. The 128-page lawsuit also contains a parody of "Burning Down the House" by Talking Heads. According to the lawsuit, an unidentified S&P analyst, listed in the complaint as "Analyst D", wrote a parody of the song and emailed it to friends. He later sent a video of himself singing and dancing to the song while entertaining coworkers. <ref> {{cite web|url = http://www.justice.gov/opa/pr/2013/February/13-ag-156.html|name = Department of Justice Sues Standard & Poor’s for Fraud in Rating Mortgage-backed Securities in the Years Leading up to the Financial Crisis|org = Department of Justice|date = February 5, 2013}}</ref> <ref> {{cite web|url = http://www.chicagotribune.com/business/breaking/chi-us-suit-against-sp-includes-talking-heads-parody-20130205,0,2127511.story|name = U.S. suit against S&P includes Talking Heads parody|org = Chicago Tribune|date = February 5, 2013}}</ref>  
  
 
==S&P Downgrades U.S. Credit Rating==
 
==S&P Downgrades U.S. Credit Rating==

Revision as of 06:03, 5 February 2013

FTSE Russell banner 2016.gif
Standard & Poor's Corporation
S&P.gif
Founded 1941
Headquarters New York
Key People Douglas Peterson, President; Pat Milano, EVP
Products Ratings, risk evaluation, indices, research, data
Website www.standardandpoors.com


Standard & Poor's Corp. (S&P) provides credit ratings, indices, investment research, risk evaluation and data for investors. The corporation analyzes issuers and debt obligations of corporations, states and municipalities, financial institutions, insurance companies and sovereign governments. It also provides insight into the credit risk of structured finance deals, providing an independent view of credit risk associated with debt-securitized instruments.

S&P Ratings and the 2008 Financial Market Collapse

S&P was among the ratings agencies that were heavily criticized in the aftermath of the 2008 market collapse, for highly rating mortgage backed securities, credit default swaps and other derivatives which were actually high-risk, low-quality investment products. Many in Congress and elsewhere claimed that S&P and other ratings agencies had an inherent conflict of interest, being paid by large Wall Street firms to rate financial products that the firms were selling.

S&P and other ratings agencies defended their ratings practices in the US, claiming they had first amendment, freedom of speech, protections and that their faulty ratings were opinions about various products.[1]

On November 5, 2012, the Federal Court of Australia ruled that S&P and ABN Amro "deceived" and "misled" 12 local Australian councils that purchased triple-A rated products called constant proportion debt obligations in 2006. The ruling marked the first time a credit ratings agency had been brought to a full trial over a structured finance product.[2] [3] At the time, it was thought the Australian court's ruling could open the ratings agencies to further cases in Europe.

On February 5, 2013, the Department of Justice sued S&P for fraud in rating mortgage-backed securities during the years leading up to the financial crisis. The Department of Justice, filing a civil lawsuit in Los Angeles, accused S&P and its parent company McGraw-Hill of three types of fraud. The motive, according to the lawsuit, was to collect fees from firms that were pooling risky home loans into securities. [4] [5]

In a statement, the Department of Justice claimed that several investors, who were also federally insured institutions, lost billions of dollars on CDOs for which S&P issued inflated ratings that misrepresented the securities' true credit risks. The 128-page lawsuit also contains a parody of "Burning Down the House" by Talking Heads. According to the lawsuit, an unidentified S&P analyst, listed in the complaint as "Analyst D", wrote a parody of the song and emailed it to friends. He later sent a video of himself singing and dancing to the song while entertaining coworkers. [6] [7]

S&P Downgrades U.S. Credit Rating

On Aug. 6, 2011, S&P issued the first-ever downgrade of the U.S. credit rating.[8] It proceeded on Aug. 8, 2011 to downgrade the credit ratings of Fannie Mae, Freddie Mac and several other U.S. government entities, reflecting their dependence on federal support.[9]

Standard & Poor's had in April of that year downgraded its outlook for the United States from stable to negative noting the U.S.'s continuing budget deficit, debt growth and it's failure to establish a long-term solution to both issues.[10]

  • Over $1.5 trillion in investment assets is directly tied to S&P indexes, and more than $5 trillion is benchmarked to S&P indices - more than all other index providers combined.
  • The total amount of outstanding debt rated by S&P globally is approximately U.S. $34 trillion, in 100 countries. In 2006, Standard & Poor's Ratings Services published more than 495,000 ratings, including new and revised ratings.
  • The S&P Global 1200 covers 31 markets and approximately 70 percent of global market capitalization.
  • Standard & Poor's Equity Research offers fundamental coverage on over 2,000 stocks.[11]

On August 23, 2011, Douglas Peterson stepped up as president of Standard & Poor's, replacing Deven Sharma.[12]

Products and Services

Standard & Poor's Indices

Standard & Poor's Index Services maintains a wide variety of investable and benchmark indices. Its family of indices includes the S&P 500, an index with $1.3 trillion invested and $4.8 trillion benchmarked, and the S&P Global 1200, a composite index composed of seven regional and country headline indices.

Working with organizations through licensing agreements or to create and license a broad array of indices, with the imprimatur of S&P's name, is a major business of Standard & Poor's.

As of November 2007, it listed[13]:

  • S&P global indices (15)
  • S&P U.S. indices (29)
  • S&P Canadian indices (16)
  • One S&P Latin American index, the S&P Latin America 40
  • S&P European indices (7)
  • S&P Asian indices (20)
  • S&P Japanese indices (5)
  • S&P Australian indices (14)
  • S&P emerging market indices (8)
  • S&P alternative indices, including real estate, hedge fund, commodity indexes and others (22)
  • S&P fixed income indices (23)
  • S&P strategy indices - Standard & Poor's also creates custom indices to take advantage of investment strategies that normally cannot be replicated using existing index calculation methodologies (13).

Credit Ratings

Standard & Poor’s provides credit ratings and credit risk analysis. They have credit ratings outstanding on approximately $34 trillion of debt in more than 100 countries.

Fund Services

Standard & Poor's Fund Management Ratings provide insight into the performance of the world's leading investment funds by examining how managers have achieved performance. Extensive fund research for clients and fund shortlists to help clients process fund selection are part of those services.

Equity Research

Standard & Poor's independent equity research covers approximately 2,000 stocks globally. Neither Standard & Poor's nor its parent company, The McGraw-Hill Companies, conducts any investment banking or securities underwriting activities.[14]

Risk Solutions

Standard & Poor's Risk Solutions address major components of an internal rating system, including tools and methodologies for the analysis of probability of default, loss given default, and exposure at default.[15]

Data Services

Standard & Poor's provides vital credit, company, index, funds, reference and pricing data to support your financial models and company and industry analysis. This includes company fundamental analysis, credit information, index performance data, reference data, and securities pricing.[16]

History

Standard & Poor's traces its origins to the publication, in 1860, of Henry Varnum Poor's History of Railroads and Canals in the United States, a precursor of modern stock reporting and analysis.

  • In 1906, the Standard Statistics Bureau was formed to provide previously unavailable financial information on U.S. companies.
  • In 1916, Standard Statistics began to assign debt ratings to corporate bonds, with sovereign debt ratings following shortly thereafter.
  • In 1940, municipal bond ratings were introduced.
  • In 1941, Poor's Publishing and Standard Statistics merged to form the Standard & Poor's Corp.
  • In 1966, The McGraw-Hill Companies, Inc. acquired Standard & Poor's.[17]

Key People

References

  1. Court Papers Undercut Ratings Agencies' Defense. New York Times.
  2. S&P found guilty of misleading investors. FT.
  3. Councils win landmark case against Standard and Poor's, ABN Amro. The Australian.
  4. Holder Cites `Egregious' Conduct by McGraw-Hill, S&P. Bloomberg.
  5. U.S. sues S&P over subprime ratings. CNN.
  6. Department of Justice Sues Standard & Poor’s for Fraud in Rating Mortgage-backed Securities in the Years Leading up to the Financial Crisis. Department of Justice.
  7. U.S. suit against S&P includes Talking Heads parody. Chicago Tribune.
  8. S&P downgrades US credit rating. Associated Press/Yahoo! News.
  9. S&P Cuts U.S. Government Entities. WSJ.com.
  10. Standard & Poor's changes US outlook to negative. Risk.net.
  11. Overviews. Standard & Poor's.
  12. Douglas Peterson to Become President of S&P. Bloomberg.
  13. "S&P Indices”. www.standardandpoors.com.
  14. "Equity Research”. Standard & Poor's.
  15. "Risk Solutions”. Standard & Poor's.
  16. "Data Services”. Standard & Poor's.
  17. "History”. Standard & Poor's.