Newsroom

February 06, 2013

Waters says DOJ's S&P suit overdue

Feb. 7, 2013 – House Financial Services Ranking Member Maxine Waters, D-Calif., on Wednesday commended the Department of Justice for filing its "long overdue" lawsuit against Standard & Poor's over rating activities in lead-up to the financial crisis.

"For years, credit ratings agencies artificially inflated the housing market by issuing AAA ratings for securities based largely on predatory, subprime mortgages with little or no scrutiny," Waters said. "Due to the agencies' high ratings for collateralized debt obligations (CDO) and other toxic assets, many banks bought risky debts that they would have normally avoided, fueling the subprime meltdown that led to the financial crisis."

Waters said the ratings agencies should be held to a higher standard of accountability. "And to the extent any one credit ratings agency, or its employees, knowingly engaged in fraudulent conduct, the Justice Department should prosecute those offenses to the full extent of the law," she said.

The Justice Department announced its suit Tuesday. It said S&P engaged in a scheme to inflate ratings for the debt underlying residential mortgage-backed securities and CDOs to help clients get the debt off their books. Several corporate credit unions, including Western Corporate FCU and U.S. Central Corporate FCU, failed as a result of their large investments in mortgage-backed instruments that went sour.