Judge gives S&P boost in federal lawsuit

by Ryan Smith18 Apr 2014
A federal judge has given Standard & Poor's a weapon in its fight against a $5 billion Justice Department lawsuit.

The Justice Department is suing the ratings agency for giving inflated ratings to mortgage bonds it knew to be subpar. S&P, meanwhile, contends the government is suing merely in retaliation for the agency's 2011 downgrade of the United States credit rating.

US District Judge David Carter has ruled that the Justice Department must provide documents relevant to S&P's claim, according to a Businessweek report. Carter ruled that S&P had the right to know whether the Obama administration's anger at the downgrade played a role in the lawsuit. He cited a 2011 phone call allegedly placed by then-Treasury Secretary Tim Geithner to Harold McGraw III, CEO of S&P's parent company. McGraw swore in an affidavit that Geithner criticized the downgrade as unpatriotic, Businessweek reported.

The government denies the downgrade had any role in its decision to sue. It asserts that S&P knowingly inflated bond ratings for its biggest banking clients in order to curry favor.

S&P isn’t only in trouble with the feds. Several states are suing the ratings company on similar grounds. S&P has categorically denied any wrongdoing, calling all of the lawsuits “meritless.”

“The claims are simply not true and we will vigorously defend S&P against them,” the company said in a statement.


  • by PacFore | 4/18/2014 9:19:31 AM

    it's true, S & P saw money and felt greed and made their ratings accordingly. Guilty as accused!

  • by Hedge | 4/19/2014 5:45:35 AM

    The ratings agencies gave cover and legitimacy to the sale of junk mortgages all around the world. If they had actually done their job, the crises would have been far less severe. Proper ratings would have dried up much of the funding much earlier and kept a better balance in the market. These companies have never been held accountable for their major contribution to the crisis.

  • by KB | 4/21/2014 6:20:38 AM

    There's 1 of 2 conclusions:

    1) The S&P did inflate ratings because those mortgages were crap
    2) The S&P has no concrete data for its ratings and therefor is a worthless and incompetent agency, because again, those mortgages were crap.


Should CFPB have more supervision over credit agencies?