Legal Briefing: Ratings Agencies Testify Before Congress
Ratings Agencies and the Financial Crisis
The ratings agencies will testify before the Senate Permanent Subcommittee on Investigations on Friday, and the Committee intends to produce 550 pages of exhibits reflecting its investigation of the agencies. Excerpts were released yesterday, and the New York Times has a couple of juicy ones that show the agencies knowingly lowered their standards to give Collateralized Debt Obligations (CDOs) high ratings. A 2004 email from a Standard and Poor's employee reads:
"We are meeting with your group this week to discuss adjusting criteria for rating CDOs of real estate assets this week because of the ongoing threat of losing deals," the email said. "Lose the CDO and lose the base business -- a self reinforcing loop."The Times quotes another S&P email from June 2005, which warns that tampering "with criteria to 'get the deal' is putting the entire S& P franchise at risk -- it's a bad idea." And a more colorful email noted by the paper shows S&P's other ratings divisions considered the mortgage raters crazy: "[The mortgage securities ratings division has] become so beholden to their top issuers for revenue they have all developed a kind of Stockholm syndrome which they mistakenly tag as Customer Value creation."
We'll have more details after we've had a chance to review the full release today.
Will Blagojevich Be Obama's Lewinsky?
Whatever the merits of the Clinton impeachment, without a doubt the Lewinsky scandal hijacked his presidency. Rod Blagojevich has now subpoenaed President Obama, alleging that only Blagojevich and the President have information that can prove the ex-governor's innocence. Unlike President Clinton, President Obama has not been accused of any wrongdoing. However, parts of Blagojevich's subpoena that were supposed to have been blacked out -- but were briefly accessible online -- suggest that the President's involvement is significant enough that the case could turn into a major headache.
Bloggers Beware: You're Not Journalists in New Jersey
Journalists in some states are allowed to protect their sources if the state has a "Shield Law." New Jersey is one of those states, but a recent court decision holds that bloggers are not journalists for the purpose of the Shield Law, according to the ABA Journal. As a result, a blogger has to tell a website the source for her claim that the site suffered a security breach of its customers' personal information.
New York Criminalizes Huffing Helium...
A recent case reported by the New York Law Journalupholds charges against helium balloon sellers for "unlawfully possessing or selling noxious material" on the grounds that helium is a "noxious substance." Apparently, the arresting police saw two men filling balloons and selling them to customers who then inhaled the gas. Surely, the cops must have thought the balloons were filled with nitrous oxide; not even former New York Mayor Rudi Giuliani would have sicced the cops on helium balloon sellers (Guiliani tried to get the NYPD to ticket jaywalkers, but they refused). However, the case got started, and now it's established: You can face criminal charges in New York for selling helium balloons.
... and D.C. Criminalizes Bike Riding While Intoxicated
A D.C. court just upheld the conviction of a man charged with operating a vehicle -- his bike -- while under the influence. I don't condone biking-while-drunk (though I confess I've been guilty of it), particularly since in this case the guy was arrested after almost running over a small kid ("almost" being a key word). Nonetheless, the penalties for driving while intoxicated have grown so severe I can only hope drunk biking doesn't carry the same penalty as drunk driving.