The U.S. Justice Department has sued McGraw-Hill Cos. and its S&P unit, accusing it of deliberately understating the risk of bonds backed by mortgages made to the riskiest borrowers to win business from Wall Street banks. The suit raises pressure to accelerate competition in the ratings industry -- while the government itself has adopted rules that left the business dominated by the same companies whose flawed grades sparked the worst financial crisis since the Great Depression.
Standard & Poor’s slapped its best possible grade on 84 percent of a $500 million collateralized debt obligation named for a thorn tree, 98 percent of which was subprime residential mortgage-backed securities. The sting came a year later.
When the U.S. Justice Department charged Standard & Poor’s with fraud earlier this month and demanded $5 billion in restitution, it was the culmination of the Obama administration’s four-year pursuit of financial chicanery masquerading as sacrosanct credit ratings.
A $1.6 billion collateralized debt obligation issued by Vertical Capital LLC in March 2007 with the same name as a portion of the beach at St. Tropez, France, burned out just 228 days after it was issued.
McGraw-Hill Cos., accused by the U.S. of misleading investors about the risks of subprime mortgage bonds that helped ignite the credit crisis, reported a loss of $216 million in the fourth quarter as it took a charge on the pending sale of its education business.
A Standard & Poor’s analyst in 2004 sent an e-mail to executives at the rating company’s structured- finance group. It had lost a job to Moody’s rating a mortgage- backed security because S&P criteria were more demanding, and something had to be done, the analyst allegedly wrote.
A unit of New York Life Insurance Co. issued a $1.5 billion collateralized debt obligation named after a Northern sky constellation in April 2007. The deal burst when it defaulted less than a year later.
Asian stocks rose, with the regional benchmark index advancing for a second week, as Japan’s Nikkei 225 Stock Average closed above 15,000 for the first time since 2007 after the yen touched a 4 1/2-year low against the dollar.
U.S. stocks rallied for a fourth straight week, sending benchmark indexes to record highs, as data showing confidence improved among consumers and small businesses fueled optimism in the world’s largest economy.
U.S. stocks rebounded from yesterday’s drop and the Dollar Index rose to the highest level since July 2010 as better-than-estimated economic data fueled speculation the Federal Reserve will consider scaling back stimulus. Gold extended its longest slump in four years.
Chinese stocks slid the most in a month this week in New York after companies from Elong Inc. to Renren Inc. forecast future sales below analysts’ estimates as growth at the world’s second-largest economy slows.
Once dismissed by Wall Street as a feel-good fad, “sustainable and responsible investing” has gained momentum, today attracting nearly one in every nine dollars under professional management in the United States.
General Motors Co., poised to rejoin the Standard & Poor’s 500 Index, topped its $33 initial public offering price for the first time in more than two years as the automaker prepares to introduce redesigned full-size pickups.