California is among the first of the states to take action. Their suit, filed Tuesday Feb. 5th in San Francisco Superior court, claims S&P cost the state pension fund up to 1 billion dollars in loses due to their fraudulent risk assessments.
Finally, five years after the recession hit in 2008, retribution is being sought. The government has filed suit against Standard and Poor’s to the tune of 5-billion dollars, for misleading investors about market risks.
Standard & Poor'(S&P) is one of the three major financial “gatekeepers” of Wall Street, responsible for rating banks’ and financial institutions’ risk levels. The claim is that S&P secretly lowered their standards for ratings of major investment banks, in exchange for inflated service costs.
During the years leading up to the recession, S&P issued a plethora of AAA ratings, the highest rating one can receive, to risky sub-prime mortgage loans, and securities, and in doing so, helped cause the biggest financial crises in recent history. Both government and state agree there has been fowl play.
California is among the first of the states to take action. Their suit, filed Tuesday Feb. 5th in San Francisco Superior court, claims S&P cost the state pension fund up to 1 billion dollars in loses due to their fraudulent risk assessments. Other states are expected to take similar action, signifying a new concerted effort to hold someone accountable for crimes committed in Wall Street.
California Attorney General, Kamala D. Harris, will utilize state law, and the False Claims Act, in hopes of awarding California three times the amount of the claim, due to the fact that the state pension fund was affected and thus, making it a fraud against the state.
Although the damage has already been done, the law suits against S&P signify a big step in the right direction not only in the way of retribution, but also for making some sense of what happened in the 2008 financial crisis. If S&P is found guilty, they will be forced to give up over five years worth of company revenue, as well as pave the way for future action to be taken against the other two major rating agencies, Moody and Fitch. Americans’ trust in the financial institutions of this country has been severely shaken over the past five years and this law suit may help restore some of that trust.
