(NEW YORK) — The Justice Department is going after Standard & Poor’s, the largest credit ratings firm, accusing it of inflating the housing bubble. A federal lawsuit was reportedly filed Monday night in Los Angeles.
The government alleges that rosy endorsements of risky mortgage-backed securities ignored Standard and Poor’s own standards.
According to The New York Times, the civil suit claims that between 2004 and 2007, S&P “knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors.”
The collapse of mortgage bonds triggered the financial crisis that cost investors billions of dollars.
In a statement reacting to the lawsuit, S&P called the government’s lawsuit “entirely without factual or legal merit.” The company complained that it was being punished unfairly for failing to predict the collapse of the housing market.
The lawsuit is the first federal crackdown against ratings firms linked to the mortgage mess. Some state prosecutors are expected to join the suit.
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Natalia Hepworth, EastIdahoNews.com