Don’t wait: there’s less than 24 hours left to get (almost) any Marketplace thank-you gift.
In a lawsuit filed late Monday, the U.S. Department of Justice claims the credit rating firm Standard & Poor’s knew some $4 billion worth of mortgage-backed securities were risky. But, the government claims, S&P still gave those securities top ratings anyway, helping to fuel the nation’s mortgage meltdown.
Economic consultant Gary Shilling says Wall Street banks needed S&P’s stamp of approval.
“The rating agencies were working with [banks] to put the maximum amount of what was really very low-quality merchandise in there, securitize it, and sell it off to people who thought a “AAA” rating meant something,” says Shilling.
McGraw Hill, S&P’s parent company, posted a lengthy rebuttal on its website.
“What the government is claiming is just not so,” says Floyd Abrams, the company’s attorney.
George Washington University law professor Jeffrey Manns says this is the first time the government has sued a credit rating agency over the housing crisis.
“It may underscore that the federal government will take a more aggressive posture in the future in trying [hold] rating agencies accountable,” says Manns.
It’s expected Attorneys General from at least a dozen states will also file suit.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.
Donate now to get almost any thank-you gift.