Suit by Illinois AG Claims Credit Rating Agency Ignored Risks of Bundled Mortgages
Illinois Attorney General Lisa Madigan claims in a lawsuit filed on Wednesday that Standard & Poor’s gave high ratings to mortgage-backed securities while ignoring the risks of the investments.
Madigan accuses the company of bolstering ratings to retain clients and generate revenue, report the Chicago-Sun-Times and the Associated Press.
The suit refers to employee emails showing a low opinion of the rating system. One employee says in an instant message that investments “could be structured by cows and we would rate it.”
“The mortgage-backed securities that helped our market soar—and ultimately crash—could not have been purchased by most investors without S&P’s seal of approval,” Madigan said in a statement.
An S&P spokesman said the suit is without merit.
Related coverage:
ABAJournal.com: “Ohio AG: Major Credit Agencies ‘Sold Out’ in Toxic Mortgage Mess”
ABAJournal.com: “Bond Rating Firms, Criticized in Subprime Crisis, Near Deal on Reform”
