BLOG VIEW: Last Tuesday, U.S. Attorney General Eric Holder used a press conference to announce the U.S. Department of Justice's (DOJ) civil lawsuit against Standard & Poor's Rating Services (S&P) in regard to the company's ratings on certain collateralized debt obligations (CDO) during 2007.

"The action we announce today marks an important step forward in the administration's ongoing efforts to investigate - and punish - the conduct that is believed to have contributed to the worst economic crisis in recent history," said Holder.

That all sounds wonderful, of course, if you conveniently forget that this administration has punished no one from Wall Street in connection with the 2008 economic crash. Even the well-tanned symbol of the scandal, Angelo Mozilo, is currently keeping in shape on a country club golf course and not in a penitentiary exercise yard.

The DOJ's chronic bumbling on this matter was the subject of "The Untouchables," a documentary produced as part of the PBS series "Frontline." In announcing the Jan. 22 broadcast premiere of this film, PBS issued a press statement that accused Holder and his department of failing to "act on credible evidence that Wall Street knowingly packaged and sold toxic mortgage loans to investors, loans that brought the U.S. and world economies to the brink of collapse."

So why did Holder and his gaggle of attorneys suddenly decide that S&P should be dragged into court? Well, for starters, that is not what the department wanted. Much to the DOJ's chagrin, S&P refused to play ball with the government's strategy of multimillion-dollar shakedowns.

According to a New York Times report, Holder's department demanded that S&P and its parent company, McGraw-Hill, pay a fine of more than $1 billion and agree to the admission of wrongdoing to at least one count of fraud. But S&P would not agree to a fine above $100 million, nor would it admit to any wrongdoing. Obviously, the S&P executives are not cut from the same cloth as Bank of America's Brian Moynihan, who indifferently shelled out billions in federal settlement fines and bragged that this form of punishment was merely "like a bad hour" for his bank.

Unable to secure a settlement, the DOJ had no choice but to proceed. Of course, it went about its efforts with utter silliness by leaking the news of the lawsuit prior to filing the proper legal papers. However, S&P one-upped the DOJ by issuing its own four-page statement prior to the DOJ's court filing. In its statement, S&P angrily rebuked the department's assertions and all but accused Holder of recklessly rewriting history.

"It would disregard the central facts that S&P reviewed the same subprime mortgage data as the rest of the market - including U.S. government officials who, in 2007, publicly stated that problems in the subprime market appeared to be contained - and that every CDO that DOJ has cited to us also independently received the same rating from another rating agency," said S&P in its statement.

Yes, what about those other rating agencies? Why is S&P the only one in the DOJ crosshairs? You don't think it has to do with the fact that S&P was the only rating agency to downgrade the federal government's credit rating following last year's debt ceiling negotiation fiasco? Or is that just a minor coincidence?

In last week's announcement, Holder insisted that S&P's ratings of CDOs back in 2007 were an act of deliberate and calculated fraud.

"We allege that, by knowingly issuing inflated credit ratings for CDOs - which misrepresented their creditworthiness and understated their risks - S&P misled investors, including many federally insured financial institutions, causing them to lose billions of dollars," Holder proclaimed. 

Of course, having an Obama administration official lecturing the private sector about ill-considered behavior that results in the loss of billions of dollars is like having Kim Kardashian lecture teenage girls about the importance of chaste behavior.

Whether Holder can make those bold charges stick in court remains to be seen. But in view of his track record to date on the subject of bringing the villains of the 2008 crash to trial, I think Holder would do better to go back to the drawing board and come up with a new settlement that S&P would consider.

- Phil Hall, editor, MortgageOrb

(Please address all comments regarding this opinion column to hallp@mortgageorb.com.)