According to the folks at Standard & Poor’s credit rating agency, the Department of Justice is going to file a civil lawsuit against the company over alleged criminal activities related to the financial crisis that began in 2008.
The Department of Justice supposedly is suing S&P because of its bond rating practices regarding subprime mortgages. The announcement of the pending lawsuit caused shares of McGraw-Hill Cos., the parent of S&P, to drop 13.8 percent.
Shares of Moody’s, another credit rating agency, also slid more than 10 percent after the announcement in anticipation of the Department of Justice coming after that company as well.
The credit rating agencies have been criticized in the past for giving high ratings to subprime mortgages that then tanked, fueling the financial crisis that brought Barack Obama to power.
According to the New York Times, talks between the government and S&P collapsed last week after the government tried to strongarm a $1 billion settlement out of the company.
But the timing of the lawsuit is odd, coming more than five years after the supposed crimes. If the companies’ actions had indeed been criminal, then you might think that the DOJ would have moved more swiftly to penalize them.
In 2011, however, S&P angered the White House by downgrading the country’s credit rating from AAA to AA+, blaming “America’s governance and policymaking becoming less stable, less effective, and less predictable.”
At the time, Administration officials were publicly annoyed and privately furious, according to White House sources. Obama’s chief economic adviser, Austin Goolsbee, ripped the decision as politically motivated.
More recently, Moody’s and Fitch Ratings, another credit rating company, have been warning that the U.S. could be facing another downgrade.
The DOJ may express a belated interest in alleged financial crimes, but the lawsuit threat, coming after Obama’s re-election, strongly suggests that the Administration is seeking revenge for S&P downgrading the United States’ credit rating and embarrassing the president.
It’s saying a lot about this Administration that the suggestion of a revenge motive sounds entirely believable.