Tags: Sheffield | S&P | chilling | precedent

CEI's Carrie Sheffield: Govt Suit Against S&P a 'Chilling Precedent Against Free Speech'

By    |   Friday, 30 January 2015 09:27 PM

The government's case against Standard & Poor's over its rating of home mortgage bonds prior to the 2008 financial crisis represents "a chilling precedent against free speech," Carrie Sheffield, a fellow at the Competitive Enterprise Institute and a contributor to Forbes.com, told Newsmax TV.

S&P is reportedly close to a $1.37 billion settlement of the government's allegations that it gave inflated ratings to the bonds.

The government's action "sets a troubling precedent for anybody who crosses the halls of power," Sheffield, who once worked for S&P's competitor, Moody's Investors Service, told "The "Steve Malzberg Show" on Newsmax TV.

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The government has singled out Standard & Poor's, she said. "There are a lot of people who were wrong about mortgages and housing prices."

S&P and government critics view the government's suit as retaliation for the ratings firm's downgrade of U.S. government debt in 2011, Sheffield noted.

"When this lawsuit came out I was working for Moody's, and we were relieved it wasn't us. But who's to say it wouldn't be us next if we were to downgrade U.S. debt," she said.

"This is really an issue of free speech. It's about the First Amendment and speaking out. We know the ratings were wrong, but we also know that everybody else was wrong, including the Treasury, the Fed and the other rating agencies."

The Obama administration was responding to what it viewed as an attack on its economic stewardship, Sheffield said. S&P alleges that Treasury Secretary Timothy Geithner called the firm after the downgrade and essentially threatened the firm, she said.

"When you look at what's happening with the IRS targeting conservatives, this would not be out of the realm of possibility."

So why didn't S&P fight it out in court?

Their position would "fall on deaf ears," Sheffield said. "They did try to make that argument. This has been a protracted process." The proposed settlement would wipe out S&P's profit for a year, she said.

Meanwhile, Sheffield agrees with the consensus forecast that the Fed will hold off at least until June on raising interest rates.

"They're going to wait for at least six months," she said. "People thought maybe it could happen in the first quarter. With oil prices being so volatile, they would want to wait." U.S. oil prices have plunged 55 percent since late June.

"Also, with the European Central Bank doing their own version of QE [quantitative easing], there are so many variables right now that they want to just hold out."

The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent for the past six years.

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The government's case against Standard & Poor's over its rating of home mortgage bonds prior to the 2008 financial crisis represents "a chilling precedent against free speech," Carrie Sheffield, a fellow at the Competitive Enterprise Institute and a contributor to Forbes.com, told Newsmax TV.
Sheffield, S&P, chilling, precedent
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2015-27-30
Friday, 30 January 2015 09:27 PM
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