US To Sue S&P Over Mortgage Ratings In Historic Case

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    This Oct. 9, 2011 file photo shows 55 Water Street, home of Standard & Poor's, in New York. S&P said Monday, Feb. 4, 2013, the U.S. government is expected to file civil charges against Standard & Poor's Ratings Services, alleging that it improperly gave high ratings to mortgage debt that later plunged in value and helped fuel the 2008 financial crisis. The charges would mark the first enforcement action the government has taken against a major rating agency involving the worst financial crisis since the Great Depression. (AP Photo/Henny Ray Abrams, File)

    This Oct. 9, 2011 file photo shows 55 Water Street, home of Standard & Poor’s, in New York. S&P said Monday, Feb. 4, 2013, the U.S. government is expected to file civil charges against Standard & Poor’s Ratings Services, alleging that it improperly gave high ratings to mortgage debt that later plunged in value and helped fuel the 2008 financial crisis. The charges would mark the first enforcement action the government has taken against a major rating agency involving the worst financial crisis since the Great Depression. (AP Photo/Henny Ray Abrams, File)


    The U.S. Justice Department is planning to sue Standard & Poor’s over its 2007 mortgage ratings in what would be the United State’s first federal case against a major credit rating agency,according to the Financial Times.

    U.S. regulators are taking the agency to task over the top-notch rating it gave securities, or CDOs, in the leadup to the 2008 economic meltdown, said MSNBC. Charges are expected to be filed this week against the McGraw-Hill unit.

    Investors have accused S&P other major agencies of providing securities with high ratings that they say directly contributed to the misvaluing of thousands of subprime and other mortgage securities, which in turn lead to the 2008 US housing crisis that precipitated a global financial downturn, according to MSNBC.

    They claim S&P and other agencies upped the ratings in an attempt to boost profit, misleading investors about the financial climate, said FT.

    Standard & Poor’s described the expected DOJ lawsuit as “entirely without factual or legal merit,” said Reuters, adding: “DOJ would be wrong in contending that S&P ratings were motivated by commercial considerations and not issued in good faith,” said FT.

    Illinois and Connecticut have also filed suit against S&P over the ratings, said FT.

    This article was originally published in Global Post.


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