Standard & Poor’s Financial Services LLC and its parent, McGraw Hill Financial Inc., were sued by New Jersey for allegedly failing to give objective ratings to mortgage-backed securities, the state’s attorney general said.
Credit-rating companies routinely award higher rankings to debt issued by banks and corporations that pay them the most, a conflict of interest that may escape Congressional efforts to change the way they do business.
Shareholders in U.S.-listed companies can thank Standard & Poor’s for making them $1 trillion poorer after the rating firm earlier this month lowered the grade on Treasury securities for the first time to AA+ from AAA. Now, some of the most experienced investors say the stock market losses make no sense.
McGraw Hill Financial Inc.’s Standard & Poor’s, preparing its defense to the fraud lawsuit by the U.S. Justice Department, will ask the government for information about investigations of other credit raters.
San Francisco lawyer John Keker, the Vietnam War platoon leader who later prosecuted Oliver North and represented clients from Eldridge Cleaver to Lance Armstrong, may deploy his “slashing and smashing” approach to defend Standard & Poor’s Financial Services LLC.
McGraw Hill Financial Inc. and its Standard & Poor’s unit won a bid to move to federal court in New York lawsuits filed by 14 states and the District of Columbia accusing the companies of inflating mortgage-backed securities ratings.