Don't Bit The Hand That Feeds You

That's what Standard & Poors has done with its downgrade of U.S. debt, and now the chicken is coming home to roost. Bloomberg is reporting that the Department of Justice is looking into both Moody's Investors Service and S&P over how the ratings agencies rated mortgage-backed securities prior to the financial crisis. Washington-based lawyers from the DoJ spoke to former employees from both Moody's and S&P on how they rated the securities, and potentially gave them grades that were not worthy just to win business. The ex-employees were approached recently. Ed Sweeney, a spokesman for S&P, which is owned by The McGraw-Hill Companies, Inc. MHP said the rating agency has “received several requests from different government agencies over the last few years regarding U.S. mortgage-related securities.” S&P will comply with requests. Shares of both companies are off roughly 8% as of the time of this writing, more than double the losses of the broader markets. This comes on the same day that S&P made some comments about the health of the economic recovery. The New York-based ratings agency said that the U.S. Budget Control Act could potentially undermine an already fragile recovery. I guess when you realize that Washington is going to bring a storm on you, you go all in.