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Justice Department Joins Investigation of S&P

Investigators are looking to determine whether Standard and Poor's over-rated dozens of mortgage securities prior to the financial crisis the ""_New York Times_"":http://www.nytimes.com/2011/08/18/business/us-inquiry-said-to-focus-on-s-p-ratings.html?pagewanted=1&_r=2 reported Wednesday.


The Securities and Exchange Commission (SEC) has been investigating the matter for several months, and the Justice Department recently joined the investigation, according to the ""_Wall Street Journal._"":http://online.wsj.com/article/SB10001424053111903639404576516561097613114.html

In response to inquiries about the investigation, S&P stated Thursday, ""S&P has received several requests from different government agencies over the last few years regarding U.S. mortgage-related securities.""

""We have cooperated and will continue to cooperate with these requests,"" S&P stated.


Both the _Times_ and the _Journal_ report the investigation began before S&P downgraded the U.S. credit rating from triple-A status to double-A status, an action for which S&P has received criticism from lawmakers and the Treasury Department.

The Treasury Department has accused S&P of basing its downgrade of the U.S. on a $2 trillion error â€" ""a basic math error of significant consequence,"" according to a ""statement"":http://www.treasury.gov/connect/blog/Pages/Just-the-Facts-SPs-2-Trillion-Mistake.aspx earlier this month on Treasury's website.

According to the _Times,_ the Justice Department is now questioning whether S&P business managers may have overridden analysts' advisements to give some mortgage bonds lower ratings than they were ultimately awarded.

""Analytic independence and objectivity have always been core principles of our ratings process,"" S&P said in its Thursday response to the investigation.

""Since 2008, S&P has implemented many steps to further enhance our analytics, independence, and to prevent commercial interests from influencing ratings,"" the ratings agency added.

""S&P's own policies have been supplemented by the passage of the Dodd-Frank Act and the implementation of regulations governing credit ratings in the EU, Japan and other parts of the world,"" S&P concluded.

An unnamed source told the _Wall Street Journal_ the SEC has also been investigating Moody's Investors Service in regards to two mortgage-bond deals.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.

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