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standard and poors

Article Index

This Rating Agency Feels the Heat - and It's About Time

By , Chief Investment Strategist, Money Morning • @ShahGilani_TW -

rating agency

In February 2013, the U.S. Department of Justice slapped Standard & Poor's with a $5 billion civil suit.

The lawsuit charges the world's largest rating agency with egregiously rating residential mortgage-backed securities and related structured products it knew were garbage as AAA. And believe it or not, a lot of people bought it.

And now, some serious stuff, as in smoking-gun internal emails at S&P, has surfaced. Just get a load of this…

Government S&P Lawsuit: Who's Next?

By , Contributing Writer, Money Morning -

A massive U.S. government S&P lawsuit has no doubt hurt the fortunes of Standard & Poor's parent company The McGraw-Hill Companies Inc. (NYSE: MHP), whose shares have dropped 25% since it was filed.

But the collateral damage could spell bad news for a number of parties and has implications even for the overall health of the U.S. economy.

The Justice Dept., joined by attorneys general from 16 states, unveiled a case accusing S&P of fudging its ratings of subprime mortgages to make the toxic securities appear better than they were.

The federal government is seeking $5 billion in penalties -- more than five times what S&P made in 2011 -- to cover losses to investors in federally insured banks and credit unions. Separate suits filed by individual states could more than double that figure.

It's the first time the government has taken action against a credit rating agency over illegal behavior tied to the recent financial crisis.

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Stock Market Today: U.S. Credit Rating At Risk Again

By , Money Morning -

The major headlines in the stock market today (Tuesday) include Moody's warning it might lower America's AAA rating, the trade deficit and a financial shakeup:

  • U.S. Credit Rating at Risk- In a statement released Monday, ratings agency Moody's said the United States is in danger of losing its AAA credit rating if Congress cannot come up with a solid plan to lower the debt-to-GDP ratio. "If those negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable," Moody's said in an e-mailed statement. "If those negotiations fail to produce such policies, however, Moody's would expect to lower the rating, probably to Aa1."

    Currently Moody's rates the U.S. AAA credit rating with a negative outlook. Standard & Poor's last year downgraded the U.S. to AA+ which is the equivalent to Moody's Aa1. Both agencies cite the political bickering in Congress and inability to deal with fiscal situations as the main reasons for the downgrades. S&P has mentioned that those risks could lead to another downgrade. When President Obama updated his federal budget in August the debt-to-GDP ratio was projected to be 75% by 2022, currently it is just over 1.04%. If lawmakers decide to go off the fiscal cliff as a debt reduction measure Moody's said it will maintain its current rating and negative outlook and then wait to see results of the fiscal cliff before deciding to return to a stable outlook.

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