Feds Investigating S&P Over Dozens of Mortgage Securities

The U.S. Justice Department is investigating ratings agency Standard & Poor's over numerous mortgage securities that were improperly assessed, according to a report from the New York Times. Allegedly, the Federal investigation began before S&P downgraded United States government debt to AA+ from AAA earlier this month. That isn't likely to help S&P, however, as Louise Story of The Times notes that "Lawmakers and some administration officials have since questioned the agency's secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations." The uproar over S&P's downgrade of U.S. debt was a blow to legislators and President Barack Obama, and markets have fluctuated wildly ever since. The week following the downgrade, equity markets experienced severe volatility. The Justice Department investigation is supposedly looking into whether managers unduly influenced the credit rating process. The Securities Exchange Commission is also looking into S&P, though over the possibility of insider trading. Story of The Times notes that after the 2007-8 financial meltdown, scrutiny of the ratings agencies has increased steadily. The agencies were widely relied upon prior to the recession, and still carry significant influence. "Since the crisis, the agencies' business practices and models have been criticized from many corners, including in Congressional hearings and reports that have raised questions about whether independent analysis was corrupted by the drive for profits." It was unclear early Thursday whether the Justice Department was looking into additional rating agencies, such as Fitch and Moody's.