When Egan-Jones rating agency downgraded the U.S. to a negative outlook they probably didn’t realize they were dealing with a ruthless thugocracy that would follow up by moving to destroy them.
Egan-Jones should have known based on the fact that S&P, Moodys & Fitch are targets for destruction in the Dodd-Frank bill. Ratings agencies have been harshly criticized for not warning investors about the housing bubble of four years ago, but the Democratic Congress at the time, which praised Fannie & Freddie, has skated on the issue.
Within days of the announcement that Egan-Jones downgraded the U.S., the SEC announced the investigation of the Egan-Jones paperwork dating back to 2008 when they applied for official status. Sean Egan, CEO and founder, has denied all charges. He further said it will not affect their independence in ratings.
Egan-Jones is the smallest approved ratings agency and they have been the quickest in recognizing weaknesses in the U.S.and European economies. They are one of the few not funded by the very people they are investigating and are paid by investors.
Today, the SEC served Egan-Jones with a cease-and-desist order. The charges are that Egan-Jones mis-respresented their expertise and omitted information. Their stocks tumbled on the news.
It’s all very suspicious coming immediately after their U.S. downgrade, particularly in light of the fact that the Obama administration was very threatening when the S&P did the very same thing. S&P is also under investigation.
The complaint might have justification because the jury is still out, and there are accusations that Egan-Jones downgraded the Jefferies Group on faulty analysis. However, the timing of this SEC complaint is suspect.
What is really ironic is that this is the same SEC which can’t find $1.5 billion in lost MF Global funds. This is the same SEC that paid off JP Morgan Chase with MF Global funds but not clients in direct violation of the law.
Read more: WSJ