Skip to comments.S&P says U.S. to file civil lawsuit over ratings
Posted on 02/04/2013 1:21:35 PM PST by LucianOfSamasota
(Reuters) - Standard & Poor's on Monday said it expects to be the target of a U.S. Department of Justice civil lawsuit over its ratings of mortgage bonds prior to the recent financial crisis.
The lawsuit against the McGraw-Hill Cos (MHP.N) unit focuses on its ratings in 2007 of various U.S. collateralized debt obligations (CDO), S&P said.
It would be the first federal enforcement action against a credit rating agency over alleged illegal behavior tied to the financial crisis.
"A DOJ lawsuit would be entirely without factual or legal merit," S&P said in a statement. "The DOJ would be wrong in contending that S&P ratings were motivated by commercial considerations and not issued in good faith."
The Justice Department was not immediately available for comment.
Several state attorneys general are expected to join the case, The Wall Street Journal said, citing people familiar with the matter. The expected charges follow the breakdown of talks between the department and S&P, the newspaper said, citing the people.
In afternoon trading, McGraw-Hill shares were down $2.39, or 4.1 percent, at $55.95.
S&P and its main rivals, Moody's Corp's (MCO.N) Moody's Investors Service and Fimalac SA's (LBCP.PA) Fitch Ratings, have long faced criticism from investors, politicians and regulators for assigning high ratings to thousands of subprime and other mortgage securities that quickly turned sour.
(Excerpt) Read more at reuters.com ...
That’s exactly the first thing that came to my mind as well.
They’ve already sued the banks that sold the structured finance products so this is just the next step. I assume they will sue AIG for being the counterparty to billions of CDS’s.
As for the rating, UST’s rallied to all time highs (lows for yields) after the downgrade. It was meaningless to the market.
Under Holder the Underwhelming, the DOJ has about as much gravitas as Dan Rather.
Of course, truth, justice, and the American Way are a joke under the chief dork, so convictions may be forthcoming.
You’re not suggesting that there’s even the appearance of a conflict of interest? Naw, can’t be.
How long before the Dow is told to report whatever numbers the government tells it to put out???
Does the whitehouse think S&P should be acting like the media????
We’re still monetizing our debt though, aren’t we? Hasn’t Bernanke decided on a permanent QE at the rate of $85 billion per month or so?
I was warning everyone this was going to happen.
Wonder how many at S+P voted Obama. I’m guessing most....
It’s $45 billion/month primarily in in MBS’s. Bid to cover ratio’s for UST’s are still strong. UST’s are still the primary vehicle for “flight to safety.”
They should respond with "twitch and we'll down-grade you so fast your children will laugh when you ask for money."
After all, by S&P's rating system, the US would likely be 'CC' -- though a 'C-' would not be unreasonable.
The general meaning of our credit rating opinions is summarized below.
AAAExtremely strong capacity to meet financial commitments. Highest Rating.
AAVery strong capacity to meet financial commitments.
AStrong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
BBBAdequate capacity to meet financial commitments, but more subject to adverse economic conditions.
BBB-Considered lowest investment grade by market participants.
BB+Considered highest speculative grade by market participants.
BBLess vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
BMore vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
CCCCurrently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
CCCurrently highly vulnerable.
CCurrently highly vulnerable obligations and other defined circumstances.
DPayment default on financial commitments.
Note: Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
Maybe it hasn’t actually happened yet? And its only PLANNED for 2013?
Anyway, a lot of folks carry the $85 billion figure, including $45 billion in UST’s:
“Under the Fed’s plan for 2013, the central bank will purchase $40 billion a month of mortgage-backed securities and $45 billion a month of long-term Treasury securities. That puts it on course to purchase $540 billion worth of Treasury securities if the policy is continued all year and $480 billion worth of mortgage bonds.”
“Big Ben has been on a buying spree: In a third round of quantitative easing, the Fed is now snapping up $40 billion a month of mortgage-backed securities and $45 billion of Treasurys.”
Imagine YOUR credit rating from TranUnion, Experian, etc. if you went from paying your Visa with your MasterCard to paying all of it with brightly colored pieces of paper that you produced on the office printer. Are negative numbers possible?
That is essentially what is happening at the Fed.
Like suing a broken thermometer, when you have a fever.
Thanks to ACORN, banks expected to get bailouts in ret. for issuing bad loans. So why was S & P “misleading” in that situation??
The only risk was to the taxpayers...
What will Rahm have to say?
This is BS. Buncha trumped up charges that will go nowhere.
This is nobama and Holder kicking S&P’s ass for the credit downgrade and a warning not to do it again. Pure and simple.
Let’s hear it for S&P! Got moxie. Got principles. Got standards. Got cojones. Everything that Holder and nobama don’t have.
Or they’re looking to plug the deficit with ready cash.
No, the charges are legitimate but the question is Will they be filling charges against Moodys or Fitch for their poor ratings? Doubtful after all Moodys and Fitch did not downgrade the government. The other (and first) agency to downgrade their bonds, Egan-Jones, reached a settlement last week prohibiting them from rating sovereigns for 18 months. Perhaps this is what they want from S&P. The message is clear. If you downgrade sovereigns you will pay the price.
Just plain ol ordinary garden variety fascism here folks. Nothing to see. Move along.
>>Were still monetizing our debt though, arent we?
More like monetizing our children’s and grand-children’s debt.
And as a parent, that irritates me into the “ETERNAL HOSTILITY” spectrum.
>>What will Rahm have to say?