Justice Department Files Suit Against S&P For Mortgage Rating Fraud

The Justice Department filed a civil law suit, which has a lower standard of proof than a criminal suit, against S&P for the ratings that it put on at least 30 mortgage backed securities.  The DOJ offered a settlement to S&P of around $1 billion to settle its case.  They turned down the settlement which is about equal to its parent company's earnings last year.  Its stock price fell by 14% after the announcement.  Investors must expect similar problems for Moody's which was also involved in rating mortgage backed securities.  Its share price fell by 13%.  The financial crisis would not have occurred without the extraordinary number of AAA ratings that the rating agencies put on mortgage backed securities.