US Sues S&P Over Pre-Crisis Mortgage Ratings

(Tuesday, February 5th, 2013 08:53 AM)

The U.S. government is accusing the debt rating agency Standard & Poor’s of fraud for giving high ratings to risky mortgage bonds that helped bring about the financial crisis.

The government said in a civil complaint filed late Monday that S&P misled investors by stating that its ratings were objective and “uninfluenced by any conflicts of interest.” It said S&P’s desire to make money and gain market share caused S&P to ignore the risks posed by the investments between September 2004 and October 2007.

The charges mark the first enforcement action the government has taken against a major rating agency involving the worst financial crisis since the Great Depression.

Ads By Artscroll:

According to the government filing in U.S. District Court in Los Angeles, the alleged fraud made it possible to sell the investments to banks. The government charged S&P under a law aimed at making sure banks invest safely.

S&P, a unit of New York-based McGraw-Hill Cos., has denied wrongdoing and said that any lawsuit would be without merit.

If S&P is eventually found to have committed civil violations, it could face fines and limits on how it does business. The government said in its filing that it’s seeking financial penalties.

The action does not involve any criminal allegations. Critics have long complained about the government’s failure to bring criminal charges against any major Wall Street players involved in the financial crisis.

Criminal charges would require a higher burden of proof and carry the threat of jail time.

McGraw-Hill shares rose 11 cents to $50.41 in Tuesday’s premarket session, after plunging nearly 14 percent the day before on the expectation that a lawsuit would be filed.

Shares of Moody’s Corp., the parent of Moody’s Investors Service, another rating agency, rose 53 cents to $49.98 before Tuesday’s opening bell, after closing down nearly 11 percent on Monday.


Ads By Israel Book Shop:


  1. takingabreak says:

    How about charging the dems in congress whobforced banks to lend to people beyond their ability to repay and then calling the republicans fearmongers for pointing it out(there is actual audio of this from congress- does anybody(on the left)care?

  2. akuperma says:

    #1- That doesn’t excuse the ratings companies from backing up the Democrats (and in all fairness, many of the offending bankers were Republicans) by claiming that a security backed up by many worthless mortgages was really AAA.

  3. akuperma says:

    But interestingly enough, they didn’t sue the other firms – probably retaliation for S&P taking away the government’s AAA rating.

Leave a Reply

You must be logged in to post a comment.

Subscribe to RSS Feed For This Article