The Farce Is Complete: S&P Downgrades Moody's To BBB+ From A-2

[CrackSmokeRepublican]

The Farce Is Complete: S&P Downgrades Moody's To BBB+ From A-2
Submitted by Tyler Durden on 08/03/2010 15:17 -0500

Pure cannibalization of a dead business model in action. Now all we can do is lean back, grab the popcorn, and wait for the Moody's response, as both companies junk each other (literally) into oblivion. Importanly, we learn that the passed Donk provision on rating agencies is pretty much a dealbreaker for the rating agency model. Once the SEC exemption is over, Mark Zandi better have that government job in hand: "In our opinion, the legislation will likely result in more instances of defending against litigation and other changes in operating practices that will likely increase operating costs and thereby reduce profitability and margins. The legislation, among other things, addresses the applicable pleading standards for certain litigation brought against rating agencies. This is contained in a provision whereby investors may be able to sue a rating agency if they can show that the agency knowingly or recklessly failed to (1) conduct a reasonable investigation of the factual elements relied upon by a credit rating agency's rating methodology, or (2) obtain a reasonable verification of those factual elements from independent third-party sources. While we believe it is likely that the new pleading standard will lead to an increase in litigation-related costs at Moody's and therefore poses an element of risk, whether the new pleading standard may increase the likelihood of successful litigation against Moody's will be determined in the future by the courts."

http://www.zerohedge.com/article/farce- ... odys-bbb-2

[Christopher Marlowe]

This is contained in a provision whereby investors may be able to sue a rating agency if they can show that the agency knowingly or recklessly failed to (1) conduct a reasonable investigation of the factual elements relied upon by a credit rating agency's rating methodology, or (2) obtain a reasonable verification of those factual elements from independent third-party sources.

I wonder what the standard was before.

In non-public concern, non-public plaintiff defamation case, First Amendment does not bar application of mere negligence standard for defamation; Dun & Bradstreet v. Greenmoss Builders, Inc., 472 U.S. 749, 761 (1985) That case originated in Vermont.

Business defamation or trade libel is an area of law with which I am not familiar. I found this:

Here are the basic elements of a cause of action for Trade Libe[l]...:
   1.  Defendant's false statement;
   2. Publication;
   3. Of matter disparaging the quality of another person's property or services;
   4. which the publisher intended to cause harm to the owner, or should have recognized as being likely to cause it; and
   5. Causation of pecuniary harm or loss.
Computerexpress, Inc. v. Jackson (2001) 93 Cal.App.4th 993, 1010.
http://www.defamationlawblog.com/2010/01/

The standard in the new legislation looks closer to "negligence" standard than that of the "malice" in defamation of a public figure: a. Knowledge that it was false or
b. Reckless Disregard for whether it was true or false

Another important distinction in business defamation vs. defamation of a person is the burden of proof as to Truth. When a person is defamed and sues, the statement is assumed to be false and the burden is on the defendant to show that the statement is True.

When a business sues for defamation, the statement is assumed to be true and the burden is on the plaintiff to show that it was false.

[CrackSmokeRepublican]

Interesting questions there CM. Makes me think that a "Ratings Agency" could be sued by shareholders if they rate themselves?