Government on the hunt for S&P
18 Aug, 2011 19:11
Weeks after their downgrade of the US debt helped spin the country further into crisis, Standard & Poor’s is now facing a probe at the hands of the Department of Justice.
The DoJ is investigating of Standard & Poor’s, the largest credit agency in the country, gave out improper ratings to huge mortgage firms during the time immediately preceding the financial crisis of 2008, the New York Times reports.Allegedly investigators believe that S&P may have issued out false ratings that would have not just bestowed false hopes into the mortgage lenders that were improperly rated, but allowed Standard & Poor’s to prey on profits while the economy was at the brink of collapse. This latest investigation out of the DoJ is reported to have begun before the downgrade was publicized earlier this month. Lawmakers have long scrutinized S&P for questionable business practices and though Justice Department claims that this investigation has been pending for some time — since before the downgrade, in fact — it does raise suspicion that only now would the investigation be publicized in the wake of the US downgrade.Neither Fitch nor Moody’s, the other largest credit raters in the country, have been linked to the probe, reports The New York Times, who originally broke the story on Thursday. Their lack of involvement thus far can’t help but raise furthers questions of a possible conspiracy between the Justice Department’s investigations being a result of this month’s downgrade. The DoJ claims that their investigation has been ongoing, yet why wasn’t word released before the country spiraled downward to a point of near default?The Justice Department believes that business managers at S & P may have overruled decisions which would have put the credit rating of mortgage companies at a lower score than the AAA-rating many of them received. Standard & Poor’s has long stated that their rating analysts operate separately and independently from the business end, but if an investigation proves otherwise, it could open up a great deal of trouble for the credit raters that are already facing criticism for their recent downgrade of the US debt.Standard & Poor’s are already in the midst of another congressional investigation that is looking into how and why they downgraded the US debt from AAA to AA+ in recent weeks. A spokesperson for S&P confirmed to the Times that an investigation was indeed pending but that they would be handling it as if any other instance. “S & P has received several requests from different government agencies over the last few years,” says spokesman Ed Sweeney. “We continue to cooperate with these requests. We do not prevent such agencies from speaking with current or former employees.”