In an announcement that came as no surprise to anyone, the U.S. Department of Justice (DOJ) has formally filed civil fraud charges against Standard & Poor's Rating Services (S&P) in regard to the firm's 2007 ratings of mortgage-backed bonds.
The news of the lawsuit was leaked yesterday by the Wall Street Journal. S&P followed with its own press statement in which it said that it was awaiting the DOJ's litigation. USA Today reports that the lawsuit was filed in Los Angeles federal court late yesterday afternoon. The lawsuit is the first federal case filed by the government against a major rating agency's involvement in the events leading up to the 2008 economic crash.
‘S&P's desire for increased revenue and market share … led S&P to downplay and disregard the true extent of the credit risks … in order to favor the interests of large investment banks and others … who selected S&P to provide credit ratings,’ the DOJ said in its lawsuit, which was filed against S&P's parent company, McGraw-Hill Companies.
A DOJ spokesperson declined to comment in depth on the lawsuit, which is expected to be joined later by a number of state attorneys general.