The Justice Department has filed a lawsuit against Standard & Poor’s, bringing renewed focus to the inaccurate ratings of subprime mortgage securities that helped trigger the financial crisis.
A spokeswoman for Justice confirmed that the suit was filed in federal court late Monday in Los Angeles. Attorney General Eric Holder will announce it at a news conference later Tuesday, an official told CNN.
The suit charges S&P with giving deceptive ratings that greatly underestimated the risk to investors buying the mortgage securities in order for the agency to collect fees from the firms that were pooling the risky home loans into securities. It charges the nation’s leading credit rating agency with misdeeds from 2004 through 2007, the period typically referred to as the housing bubble that preceded the meltdown in financial markets and the U.S. economy known as the Great Recession. Read more