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February 4, 2013
14:41 EDTMHPS&P says civil lawsuit threatened by DoJ is without legal merit, unjustified
Standard & Poor's Rating Services, a subsidiary of The McGraw-Hill Companies (MHP) disclosed that the Civil Division of the United States Department of Justice has informed the company that it intends to file a civil lawsuit against S&P focusing on its ratings in 2007 of certain U.S. collateralized debt obligations: "A DoJ lawsuit would be entirely without factual or legal merit. It would disregard the central facts that S&P reviewed the same subprime mortgage data as the rest of the market - including U.S. Government officials who in 2007 publicly stated that problems in the subprime market appeared to be contained - and that every CDO that DOJ has cited to us also independently received the same rating from another rating agency. S&P deeply regrets that our CDO ratings failed to fully anticipate the rapidly deteriorating conditions in the U.S. mortgage market during that tumultuous time. However, we did take extensive rating actions in 2007 - ahead of other ratings agencies - on the residential mortgage-backed securities which were included in these CDOs. As a result of these actions, more collateral or other protection was required to support AAA ratings on CDOs. With 20/20 hindsight, these strong actions proved insufficient - but they demonstrate that the DOJ would be wrong in contending that S&P ratings were motivated by commercial considerations and not issued in good faith."
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