See More

US probe into S&P mortgages - NY Times

Aug 18 2011 11:16 Reuters

Related Articles

S&P adds default warning to Greek woes

Big S&P 500 picture remains

Are Dow, S&P headed for 7th losing week?

S&P cuts Japan outlook

S&P: French AAA rating stable

Dis-credit rating


Washington - The US Justice Department is investigating whether Standard & Poor's improperly rated dozens of mortgage securities in the years before the financial crisis, The New York Times reported on Wednesday, citing sources familiar with the matter.

The investigation began before S&P, a unit of McGraw-Hill , downgraded the long-term US debt from a AAA rating to AA-plus this month.

In the mortgage investigation, the Justice Department has been asking about instances in which S&P analysts wanted to assign lower ratings to mortgage bonds but may have been overruled by S&P business managers, the Times reported.

It was unclear whether the Justice Department investigation involves the other two ratings agencies, Moody's Corp and Fimalac SA's Fitch, or only S&P, the newspaper said.

A Justice Department spokesman was not immediately available for comment.

Ed Sweeney, a spokesperson for S&P, told the newspaper in an e-mail that the agency had received several requests from different government agencies over the last few years and that it was cooperating with these requests.

The Times said that despite the outcry over the ratings agencies' failures in the financial crisis, investors still rely heavily on ratings from the three main agencies for their purchases of sovereign and corporate debt, as well as other complex financial products.

Companies and some countries, though not the United States, pay the agencies to receive a rating. For decades, the government issued rules that banks, mutual funds and others could rely on a AAA stamp of approval for investing decisions - which bolstered the agencies' power, the newspaper said.

A successful case or settlement against a giant like S&P could accelerate the shift away from the traditional ratings system, the Times said.

For instance, the Dodd-Frank financial reform overhaul sought to decrease the emphasis on ratings, but bank regulators have been slow to spell out how the reform would work. Financial historians told the newspaper that a government case that showed problems beyond ineptitude might spur greater reforms.

S&P has been under fire from lawmakers, market players and the US Treasury Department since its decision to cut the US credit rating.

The US Securities and Exchange Commission was also reviewing whether S&P followed all of its policies leading up to the credit downgrade, according to sources familiar with the review.

Key committees in Congress may also hold hearings about the downgrade and reforms of the ratings industry.

standard & poor's  |  financial crisis



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
1 comment
Add your comment
Comment 0 characters remaining

Company Snapshot

We're talking about:


Johannesburg has been selected to host the Global Entrepreneurship Congress in 2017. "[The congress] will ensure that small business development remains firmly on the national agenda and the radar screen of all stakeholders, the Small Business Development minister said.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

People who fall victim to Ponzi scams are:

Previous results · Suggest a vote