Just two weeks after Standard and Poor’s (S&P) downgraded the U.S. government’s credit rating to AA+, the New York Times reported that the Justice Department is investigating S&P’s ratings of mortgage securities in the lead up to the recent mortgage crisis.
Despite the timing of the news, we know that the investigation isn’t retribution for the downgrade since the investigation precedes the downgrade by months. But the rating agency’s downgrade of US treasuries certainly didn’t help its case, and is construed by many as an effort at establishing S&P independence.
The investigation began with the Securities and Exchange Commission (SEC) looking into whether S&P and Moody’s Investors Service turned a blind eye to problems with sub-prime mortgage bonds that it rated prior to the recent financial crisis. The Justice Department joined the SEC’s investigation in recent months.
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For previous coverage of the debt crisis and U.S. downgrade in Advisor’s Journal, see What Does the U.S. Downgrade Mean for Clients? (CC 11-159), Debt Limit Deal Leaves Unfinished Business (CC 11-154), & Democrats Call Debt Limit Unconstitutional (CC 11-134).