US sues S&P over pre-crisis mortgage ratingsPublished 10:46am Tuesday, February 5, 2013
WASHINGTON — The U.S. government accused Standard & Poor’s of inflating ratings on mortgage investments to boost its bottom line, taking aim at a key player in the run-up to the financial crisis.
In charges filed late Monday in Los Angeles federal court, the Justice Department said S&P gave high marks to mortgage-backed securities that later went sour, even though it knew they were risky. The government said S&P misrepresented the risks because it wanted more business from the banks.
The case is the government’s first major action against one of the credit rating agencies that stamped their seals of approval on Wall Street’s mortgage bundles. It marks a milestone for the Justice Department, which has been criticized for failing to make bigger cases against the companies involved in the crisis.
“Put simply, this alleged conduct is egregious — and it goes to the very heart of the recent financial crisis,” Attorney General Eric Holder told a news conference Tuesday. He called the case “an important step forward in our ongoing efforts to investigate and punish the conduct that is believed to have contributed to the worst economic crisis in recent history.”