US suing Standard & Poor's over mortgage bond ratings
The US justice department intends to file a civil lawsuit against Standard Poor’s based on ratings in 2007 of certain collateralised debt obligations, the company said yesterday.
The Justice Department and state prosecutors may file civil charges this week against SP, the largest credit ratings firm, alleging wrongdoing in its ratings of mortgage bonds in the lead up to the 2008 financial crisis, according to two people familiar with the matter. The lawsuits from federal and state authorities come in the wake of criticism from lawmakers over the role of bond rating firms in the onset of the financial crisis.
Inflated grades on bonds backed by subprime mortgages helped ignite the worst financial crisis since the Great Depression when their values plummeted more than five years ago.
“A DOJ lawsuit would be entirely without factual or legal merit,” the company said today in a statement. “It would disregard the central facts that SP reviewed the same subprime mortgage data as the rest of the market. – (Bloomberg)