Standard & Poor’s Sues US Government Over Alleged Retaliation For AAA Credit Downgrade

Standard & Poor's attracted ire in Washington when it downgraded the US's credit rating in August 2011. | Photograph: Alamy

Standard & Poor’s attracted ire in Washington when it downgraded the US’s credit rating in August 2011. | Photograph: Alamy

Standard & Poor’s has accused the US Justice Department of filing its $5bn lawsuit against the ratings agency in retaliation for the company’s downgrade of America’s debt in 2011.

In its defence against the suit filed on Tuesday S&P claims: “Plaintiff [Justice Department] commenced this action in retaliation for [S&P’s] exercise of their free speech rights with respect to the creditworthiness of the United States of America.”

S&P attracted considerable ire in Washington in August 2011 when it downgraded the US’s credit rating from AAA for the first time. The agency’s lawyers said only S&P had downgraded the US’s debt rating “and only S&P Ratings has been sued by the United States”. In a statement, the Justice Department said S&P’s allegations were “preposterous”.

n February, the US sued S&P, claiming that federally insured banks and credit unions had purchased mortgage-backed assets rated highly by S&P in the belief that those ratings indicated the assets were less risky than lower-rated securities. They subsequently lost fortunes when the housing market collapsed.

Attorney general Eric Holder claimed S&P knew some $4bn of mortgage-backed securities were risky and was engaged in a scheme to defraud investors. Holder claimed S&P gave its seal of approval to assets that it knew were high risk in order to please the banks that issued them and to drum up new business.

Conversations