BY KATIE BRENNAN
Did Standard and Poor’s ignore its own standards? The Justice Department is suing S&P, accusing the credit rating agency of fraud for knowingly understating the risk of mortgage investments. CNN provides some context.
“Remember those glowing ratings that S&P gave to the subprime mortgage investments in 2007? oh those subprime mortgages investments that were all flops! //flash// and almost took down the global economy”
The New York Times explains the suit specifically accuses S&P of scheming to defraud investors from September 2004 through October 2007.
But Standard and Poor’s is denying all wrongdoing, saying it made the same assumptions the rest of the world did when it considered the investments safe.
S&P made a statement before the lawsuit was even filed saying it is “without legal merit and unjustified” and that S&P “will vigorously defend against erroneous claims.”
An analyst on CNBC explains, S&P wanted to make its opening statement to the media, which would essentially serve as the jury the DOJ will try to convince.
“They are going to have to find some smoking bazooka in order to get a jury to actually convict. So they are going to do what federal prosecutors always do. They are going to vilify this company in the media.”
Standard and Poor’s is not the only rating agency that gave the risky investments higher-than-deserved ratings; Moody’s, Fitch and others did as well... so why is the DOJ singling only S&P out? One blogger points out S&P started a chain reaction when it became the first rating agency to downgrade U.S. debt, prompting Washington to...
“Announce civil charges against S&P and scare the hell out of the others so that not a single one will dare speak again of downgrading U.S. creditworthiness!”
But the DOJ is standing strong in its conviction S&P defrauded the taxpayer by scheming against a federally insured institution.
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