Tennessee joins Dept. of Justice in S&P suit - WRCBtv.com | Chattanooga News, Weather & Sports

Tennessee joins Dept. of Justice in S&P suit

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NASHVILLE (WRCB) -- Tennessee Attorney General Bob Cooper has joined the Department of Justice and other several other state Attorneys General in filing enforcement actions against Standard and Poor's and its parent company, McGraw-Hill.

The U.S. government says Standard & Poor's knowingly inflated its ratings on risky mortgage investments that played a key role in triggering the 2008 financial crisis.

The case is the government's first major action against one of the credit-rating agencies that stamped their approval on Wall Street's mortgage bundles. It marks a milestone for the Justice Department, which has been criticized for failing to make bigger cases against the companies involved in the crisis.
 
This alleged misconduct began as early as 2001, became particularly acute between 2004 and 2007, and continued as recently as 2011.
 
"Put simply, this alleged conduct is egregious - and it goes to the very heart of the recent financial crisis," Attorney General Eric Holder told a news conference Tuesday. He called the case "an important step forward in our ongoing efforts to investigate and punish the conduct that is believed to have contributed to the worst economic crisis in recent history."

Rating agencies are widely blamed for contributing to the financial crisis that caused the deepest recession since the Great Depression. They gave high ratings to pools of mortgages and other debt assembled by big banks and hedge funds, suggesting there was little risk for investors. That gave even risk-averse investors the confidence to buy them.

S&P, a unit of New York-based McGraw-Hill Cos., called the lawsuit "meritless" in a lengthy statement.

 

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