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