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S&P: DOJ to sue over '07 mortgage bond ratings

3:58 PM, Feb 4, 2013   |    comments
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By Kevin McCoy, USA TODAY

Credit rating firm Standard & Poor's Ratings Services expects to be hit with civil charges by the U.S. Justice Department over its ratings of mortgage bonds the year before the 2008 start of the financial meltdown, the company said Monday.

Government attorneys contacted the firm and said they plan to file a lawsuit focused on S&P's ratings of certain U.S. collateralized debt obligations in 2007, one year before the national financial crisis. S&P said such a lawsuit "would be entirely without factual or legal merit."

Collateralized debt obligations or CDOs are securities backed by a pool of mortgage loans, bonds or other assets.

"It would disregard the central facts that S&P reviewed the same subprime mortgage data as the rest of the market – including U.S. government officials who in 2007 publicly stated that problems in the subprime market appeared to be contained – and that every CDO that (the Department of Justice) has cited to us also independently received the same rating from another rating agency," the company said.

There was no immediate comment from the Justice Department.

Shares of McGraw-Hill Companies, S&P's parent firm, were down more than 9% at $52.91 in trading shortly after 3 p.m.

Associated Press

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