The US Justice Department plans to sue Standard & Poors ratings agency for fraudulently rating mortgage bonds that led to the 2008 financial crisis.
There have been continued questions about conflicts of interest at the ratings agency and its role in creating a housing bubble. The suit will be the first brought by the government against credit ratings agencies relative to the financial crisis.
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There had been talks of a settlement as recently as the week of January 28 but talks broke down after the Justice Department said it would seek a settlement in excess of 10 figures.
Such a settlement would wipe out the profits of McGraw Hill, Standard & Poors’ parent company, for an entire year.
The Justice Department threatened to bring a criminal case during settlement negotiations. But the case ultimately is expected to be on civil grounds.
Reportedly, prosecutors have discovered a plethora of emails incriminating Standard & Poors.
The agency says the suit, if the government decides to bring it and for which it has received notice, would be baseless.
It says it downgraded plenty of mortgage-backed investments, even during the two years leading up to the crisis.
Standard & Poors says its actions were not motivated by profit
and that they were issued in good faith.