US probes S&P;’s ratings on mortgage bonds before crisisAugust 19th, 2011 - 11:28 am ICT by IANS
Washington, Aug 19 (IANS/EFE) The US Justice Department is investigating credit rating agency Standard & Poor’s to determine if it rated mortgage bonds too highly prior to the economic crisis that erupted in late 2007, The New York Times reported Thursday.
Sources close to the investigation told the daily that the probe began before Standard & Poor’s downgraded the US’ credit rating from AAA to AA+ this month, the Times said.
Nevertheless, it is “likely to add fuel to the political firestorm” that has surrounded the downgrade action, the Times said.
It also spotlights the S&P;’s previous rating decisions and their connection to the US’ economic woes in the wake of the global recession, which include slow growth, a high unemployment rate of more than 9 percent and large amounts of public debt.
Following the downgrade, some lawmakers and administration officials have questioned the credibility of S&P;’s “secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations”, the Times noted.
The daily said that, according to people with knowledge of the government’s interviews with current or former S&P; employees, “the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S&P; business managers”.
If the government finds sufficient evidence to support what would likely be a civil case, “it could undercut S&P;’s longstanding claim that its analysts act independently from business concerns”.
It is not clear if the Justice Department’s investigation also includes the other two ratings agencies, Moody’s and Fitch.
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- US loses 'stable' outlook from top agencies - Nov 29, 2011
- S&P; warns on outlook for US sovereign debt - Apr 19, 2011
- Deven Sharma to step down as S&P;'s chief (Lead) - Aug 23, 2011
- US calls S&P; downgrade 'a facts-be-damned decision' - Aug 06, 2011
- Germany calls for European rating agencies after S&P; downgrade - Jan 16, 2012
- Top economic voices question US downgrade - Aug 08, 2011
- For first time, US loses AAA credit rating - Aug 06, 2011
- S&P;'s rating downgrade wrong decision: US official - Aug 07, 2011
- Deven Sharma to quit as S&P;'s chief - Aug 23, 2011
- US markets plunge after the downgrade - Aug 08, 2011
- Spain sells bonds at sharply lower yields - Jan 18, 2012
- Wall Street snaps three-day rally - Aug 17, 2011
- S&P; downgrades Hungary credit rating to junk - Dec 22, 2011
Tags: aaa, administration officials, business concerns, business managers, civil case, competence, credibility, credit rating agency, economic crisis, economic woes, global recession, instances, mortgage bonds, new york times, political firestorm, probes, public debt, some lawmakers, unemployment rate, us justice department