WASHINGTON -- The Justice Department plans to file a civil lawsuit against Standard & Poor's for its ratings of mortgage-related investments leading up to the financial crisis, the company said Monday.
The suit focuses on S&P's ratings in 2007 of some collateralized debt obligations, or CDOs -- securities that pool bonds and other assets, the company said. Such a suit "would be entirely without factual or legal merit," S&P said.
"It would disregard the central facts that S&P reviewed the same subprime mortgage data as the rest of the market – including U.S. government officials who in 2007 publicly stated that problems in the subprime market appeared to be contained – and that every CDO that DOJ has cited to us also independently received the same rating from another rating agency," S&P said.
"S&P deeply regrets that our CDO ratings failed to fully anticipate the rapidly deteriorating conditions in the U.S. mortgage market during that tumultuous time," the company continued. "However, we did take extensive rating actions in 2007 – ahead of other ratings agencies – on the residential mortgage-backed securities which were included in these CDOs."