Standard & Poor’s practices for grading commercial property bonds since the 2008 credit crisis are drawing scrutiny from Massachusetts authorities, according to three people with knowledge of the matter.
Bloomberg reports that the scope of the probe by state Attorney General Martha Coakley extends beyond the securities and period that are the subject of a lawsuit brought by the U.S. Justice Department against New York-based McGraw-Hill Cos. and its S&P unit.
Coakley is looking into whether the world’s biggest credit-rating company lowered its standards to win business ranking commercial property bonds as the market recovered from the worst financial crisis since the Great Depression, said the people, who asked not to be identified because they’re not authorized to speak publicly about the case. Her office acknowledged conducting a probe of S&P earlier this month.
The Justice Department’s case focuses on deals from September 2004 to October 2007, accusing S&P and its parent of inflating ratings on bonds backed by home loans made to the riskiest borrowers, according to the complaint filed Feb. 4 in federal district court in Los Angeles. The U.S. seeks $5bn in damages, equivalent to more than five years of profit at McGraw-Hill.
Hit the link below to access the complete Bloomberg article:
image: © Lisamarie Babik