The Department of Justice and state prosecutors will sue the credit ratings agency Standard & Poor’s for wrongly rating mortgage bonds before the 2008 financial crisis, according to the Wall Street Journal. The suit could come as early as this week, according to the report.
Shoddy ratings from S&P; and other agencies played a key role in the collapse of the housing market by signaling that toxic mortgage backed securities were safe investments. While S&P; and the other agencies have faced lawsuits from investors, a suit from DOJ would be the first federal action against a ratings agency since the crisis.
S&P; said the suit was baseless in a statement to the Journal. “A DOJ lawsuit would be entirely without factual or legal merit,” the statement said. “It would disregard the central facts that S&P; reviewed the same subprime mortgage data as the rest of the market — including U.S. government officials who in 2007 publicly stated that problems in the subprime market appeared to be contained — and that every (collateralized debt obligation) that DOJ has cited to us also independently received the same rating from another rating agency.”