S&P Data-Fudging Began in 2004, U.S. Suit Says: Timeline

A Standard & Poor’s analyst in 2004 sent an e-mail to executives at the rating company’s structured- finance group. It had lost a job to Moody’s rating a mortgage- backed security because S&P criteria were more demanding, and something had to be done, the analyst allegedly wrote.

'This is so significant that it could have an impact on future deals', the analyst said, according to this week’s U.S. Justice Department’s February 4th complaint. 'There’s no way we can get back on this one, but we need to address this now in preparation for future deals'.

Bloomberg reports that the May 2004 message is one of the earliest cited in the government lawsuit in which McGraw-Hill Cos.’s S&P is accused of letting competition for business take over its credit ratings calculations for securities backed by residential mortgages.

In this week’s complaint, the government sets out meetings, messages and memos that it says show S&P analysts assigning investment-grade ratings to securities based more on a desire to win business than to be accurate.

The Justice Department is seeking as much as $5bn in damages from New York-based S&P. Its ratings allegedly helped create the U.S. housing bubble, whose bursting led to the worst financial crisis since the Great Depression.

'Put simply, this alleged conduct is egregious, and it goes to the very heart of the recent financial crisis', U.S. Attorney General Eric Holder said at a February 5th press conference.

The company from September 2004 to October 2007 issued ratings on more than $2.8 trillion worth of residential mortgage-backed securities and about $1.2 trillion worth of collateralized-debt obligations, according to the complaint.

Hit the link below to access the complete Bloomberg article:

S&P Data-Fudging Began in 2004, U.S. Suit Says: Timeline

S&P as Sole U.S. Target Has Wall Street Asking About Moody’s

SEC Nominee White’s Disclosure Report Shows Possible Conflicts


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