“That’s just their spin,” she said, referring to S&P. “There’s been ample evidence that they’ve been incompetent in their jobs.”
Increasing Transparency
Enough evidence exists for the Securities and Exchange Commission to strip S&P of its designation as a Nationally Recognized Statistical Rating Organization, or NRSRO, which allows the firm to sell rankings, she said.
“All these ratings firms have not been held accountable by the SEC,” said Tavakoli, who wrote a 2011 research note titled “Tavakoli Structured Finance Revokes the Credit Rating Agencies’ NRSRO Designation.”
John Nester, an SEC spokesman in Washington, declined to comment on “vague criticisms,” saying in an e-mailed statement that the agency has “taken numerous significant actions to increase transparency, reduce conflicts and promote ratings with integrity, and we will continue to do so.”
Tavakoli also faulted the legal merits of the case, which relies in part on internal e-mails.
“We rate every deal,” one S&P analyst said in an e-mail cited in the complaint. “It could be structured by cows, and we would rate it.”
The complaint includes at least 58 examples of S&P executives ignoring internal warnings from analysts and others, dismissing relevant data, taking steps to appease issuers or acknowledging how pressure from banks could lessen the quality of its grades or delay downgrades.
“If all it takes for people to incriminate themselves is e-mails, it would be very easy to be a lawyer,” Tavakoli said.