S&P May Be Target of Federal Probe

Before you go, we thought you'd like these...
Before you go close icon

Foreclosed homeCritics of the behavior of the various ratings agencies may be getting some high-powered company. According to a report in The Wall Street Journal, the U.S. Department of Justice and some state prosecutors are preparing to file civil charges against Standard & Poor's Ratings Services in connection with the firm's ratings of mortgage bonds prior to the financial meltdown of 2008. S&P is owned by The McGraw-Hill Cos. (NYSE: MHP).

The other major ratings services, Moody's Corp. (NYSE: MCO) and Fitch Ratings were not named as possible investigation targets according to the WSJ report.

All three of the agencies have been severely criticized for their starry-eyed ratings of subprime mortgage bonds just before the real estate collapse. The commission that studied the collapse named the ratings agencies among the "key enablers of the financial meltdown."

At issue is whether or not S&P and possibly the other agencies broke securities laws or did they just miss all the signals. The former is big trouble; the latter is a big embarrassment.

For McGraw-Hill, which recently sold its education division so it could focus on its financial services businesses including S&P, a blizzard of civil lawsuits is not what the company needs right now. Shares are down about 3% in mid -afternoon trading, at $56.66 in a 52-week range of $42.02 to $58.62. Shares traded within $0.25 of the high earlier today.


Filed under: 24/7 Wall St. Wire, Law, Regulation Tagged: MCO, MHP
Read Full Story

Markets

S&P 500 2,259.53 13.34 0.59%
DJIA 19,756.85 142.04 0.72%
NASDAQ 5,444.50 27.14 0.50%
DAX 11,203.63 24.21 0.22%
HANG SENG 22,760.98 -100.86 -0.44%
NIKKEI 225 18,996.37 230.90 1.23%
USD (per EUR) 1.06 -0.01 -0.57%
USD (per CHF) 1.02 0.00 0.12%
JPY (per USD) 115.38 0.02 0.01%
GBP (per USD) 1.26 0.00 0.03%

From Our Partners