Standard & Poor's is claiming that the Justice Department's massive lawsuit against it is simply "retaliation" for the rating agency's 2011 decision to downgrade the US credit rating. In a court filing yesterday, S&P argued that the downgrade was "free speech" and that hence "the retaliation, embodied in the commencement of this impermissibly selective, punitive, and meritless litigation, is unconstitutional." A Justice Department spokesman tells the Wall Street Journal that "the allegation is preposterous."
The very day after the Justice Department filed its $5 billion lawsuit, which alleges that S&P knowingly rated lousy mortgage-backed securities too highly, the DOJ publicly denied a link between the two. And while it's common for targeted companies to make such claims, one former federal prosecutor says he doubts it will help. "It's either fraud or it isn't," he says. Then again, it's only one of 19 defenses S&P outlined in the filing. Another targets Ben Bernanke and Henry Paulson, noting that they underestimated the coming financial crisis, too. S&P wants the lawsuit dismissed.