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U.S. Attorney General Eric Holder leads a news conference with Acting Associate Attorney General Tony West, Principal Deputy Assistant Attorney General Stuart Delery and attorneys general from eight states and the District of Columbia at the Department of Justice February 5, 2013 in Washington, DC. Holder announced that the United States is bringing a civil lawsuit against the ratings agency Standards & Poor's and its parent company, McGraw-Hill Companies, over its pre-fiscal crisis bond ratings.
The California and U.S. governments have filed suit against credit ratings agency Standard & Poor's over its ratings of subprime mortgage investments. The suits claim S & P knowingly gave favorable ratings to high-risk investments so as to increase its market share and revenue. "When the housing bubble burst, S&P's house of cards collapsed and California paid the price - in billions," said California Attorney General Kamala Harris in a statement.
Was the agency just incompetent or willfully negligent? Why has the Justice Department pursued the same legal action against other credit rating groups such as Moody's? Are there political motivations behind these suits? Could the suits lead to positive change or unintended adverse consequences?
Dean Baker, co-director of the Center for Economic and Policy Research
Alex Pollock, resident fellow, American Enterprise Institute