U.S. govt. to slap fraud charges against S&P for ‘false’ mortgage ratings
U.S. largest credit rating agency Standard & Poor’s (S&P) is in trouble as country’s Justice Department is planning to file civil fraud charges against the agency accusing it of inflating the ratings of mortgage investments which crashed when the financial turbulence occurred.
The suit would be the first significant U.S. government action against the ratings industry, which during the heydays reaped record profits as it awarded gilt-edged ratings on complex bundles of home loans that quickly collapsed.
The high ratings made many investments look safer than they actually were, and are now seen as having contributed to a crisis that brought down financial system and the broader economy.
The settlement talks b/w the S&P and the Justice Department failed recently after prosecutors sought a penalty in excess of $1 billion and insisted that the company admit wrongdoing.