More than five years after the recession, credit rating agencies may finally face some legal fallout for actions that led to the 2008 financial crisis.
A recent move by the Justice Department brings validation to many who believe credit rating agencies were among the main facilitators of the financial crisis.
Before the financial collapse, the agencies, such as Standard & Poor’s, gave stellar ratings to mortgage bonds that led to the near-collapse of the global financial system. Thanks to these ratings the bonds were bought and sold by banks with great confidence.
Later, many of those bonds were worthless, and taxpayers spent billions to bail out institutions that were trading them. Meanwhile the ratings agencies made huge profits for the “service” they provided to the financial system.
Now Standard & Poor’s, one of the three major U.S. credit rating agencies will be facing Justice Department civil charges.
The department has long been criticized for not being able to bring criminal cases since the financial meltdown.
S&P put out a statement saying, “a DOJ lawsuit would be entirely without factual or legal merit.”