The U.S. Justice Department is planning to sue Standard & Poor’s over its 2007 mortgage ratings in what would be the United State’s first federal case against a major credit rating agency,according to the Financial Times.
U.S. regulators are taking the agency to task over the top-notch rating it gave securities, or CDOs, in the leadup to the 2008 economic meltdown, said MSNBC. Charges are expected to be filed this week against the McGraw-Hill unit.
Investors have accused S&P other major agencies of providing securities with high ratings that they say directly contributed to the misvaluing of thousands of subprime and other mortgage securities, which in turn lead to the 2008 US housing crisis that precipitated a global financial downturn, according to MSNBC.
They claim S&P and other agencies upped the ratings in an attempt to boost profit, misleading investors about the financial climate, said FT.
Standard & Poor’s described the expected DOJ lawsuit as “entirely without factual or legal merit,” said Reuters, adding: “DOJ would be wrong in contending that S&P ratings were motivated by commercial considerations and not issued in good faith,” said FT.
Illinois and Connecticut have also filed suit against S&P over the ratings, said FT.
This article was originally published in Global Post.