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Tuesday, February 5, 2013

U.S. government wants to sue Standard & Poor's

It would have been the fiercest attack on a rating agency: The U.S. government plans to sue Standard & Poor's. Washington wants to clarify the role of S & P has played in the financial crisis.
The rating agencies threaten further trouble because of her inglorious role in the financial crisis. According to information of the "Wall Street Journal" want the U.S. Department of Justice and the Public Prosecutor of individual states take action against industry leader, Standard & Poor's (S & P).
The major rating agencies had before the outbreak of the financial crisis provided a number of U.S. mortgage-backed instruments with very good credit scores. Investors relied on these judgments and attacked it. When the crisis hit, but lost even with the top grade AAA excellent papers abruptly in value.

Comparison failed talks
The Justice Department and the prosecutors could still file lawsuits this week against S & P for misconduct, told the "Wall Street Journal", citing people familiar with the matter. Go there primarily to the valuation model used, it said. S & P said that a possible action is completely unfounded.
The rating agencies have been criticized for years, but usually successfully evaded process on the grounds that they would have only an argument and made no purchase recommendation. The defensive line, however, seems to crumble.
Mid-January, the Federal Supreme Court in Karlsruhe ruled that rating agencies can be sued in Germany in principle, given their assessment. Before an Australian court S & P had ordered to pay a multi-million dollar compensation because the rating agency had misled investors. In New York, a court had approved a similar suit by investors.
An appeal to the U.S. Department of Justice against the S & P would have been the fiercest attack on the rating agencies. According to information of the "Wall Street Journal" before talks on a settlement had failed.
Is unclear, however, why only against S & P and against any of the competitors should be taken, the newspaper said. S & P is indeed the leader, but the agency will usually mentioned together with Moody's and Fitch, when it comes to the role at times of financial crisis.

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