I asked the Smart Jews what they thought and came away having to admit that they were indeed very smart. You can think about this trial in two ways, they said. One way is narrow: it’s about ascertaining the technical nature of a business relationship. The other way is broad: it’s about righting the pathological ways in which a particular society has organized itself.
The trouble is, derivatives rules are weaker or nonexistent elsewhere, making the call for substituted compliance either a tactic to delay enforcement until the rest of the world updates its regulations or, worse, an attempt to avoid tough regulation altogether.
ABN Amro had “employed two former employees of S&P” to learn the agency’s methods, the judge said. It knew, for example, that for S&P to give the derivatives the top rating, its models had to show a likely default rate of less than 0.728%.