Justice Filing Suit Against S&P Over 2008 Meltdown

Feds will accuse firm of fraudulently rating mortgage bonds

By Neal Colgrass,  Newser Staff

Posted Feb 4, 2013 2:49 PM CST

(Newser) – The Justice Department and state prosecutors are filing a lawsuit against the Standard & Poor's Ratings Service for its apparent role in the 2008 financial meltdown, the New York Times reports. The civil suit will accuse S&P of rating mortgage bonds too highly before their value fell off a cliff, taking much of the economy with them. Justice had been seeking a settlement with S&P, but that fell apart after officials sought a 10-figure amount—at least $1 billion—which is more than the annual profit of S&P's parent company, McGraw-Hill.

By filing a civil rather than criminal suit, the burden of proof will be less and odds of a prosecution higher. Why the feds are targeting S&P rather than rivals like Moody's Corp, Fitch Ratings, or Hearst Corp isn't clear, the Wall Street Journal reports—and S&P clearly isn't happy about it. "A DOJ lawsuit would be entirely without factual or legal merit," said the firm. The agency also said it had lowered ratings on many mortgage-backed investments before the financial crisis. (None of this will likely satisfy activist Michael Moore, who wants the head of S&P arrested.)

In this June 11, 2012, file photo, Attorney General Eric Holder speaks in Washington.
In this June 11, 2012, file photo, Attorney General Eric Holder speaks in Washington.   (AP Photo/Jacquelyn Martin)
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