In an unprecedented move, the SEC warned S&P that it might be suing it over its rating of a mortgage-backed bond. It’s the first warning a credit rating firm has gotten over its behavior leading up to the financial crisis.
We’ve been hearing a lot about rating agencies, and Standard and Poors in particular. You might have the general idea that the ratings they give bonds are a lot like your credit score. The lower the bond rating, the lower the credit score, the harder and more expensive it is to borrow money. But how exactly do these places work? And how might their judgment be corrupted? Marketplace’s Paddy Hirsch explains in this video using his trusty whiteboard and dry-erase marker.