Credit Ratings

Ryland Group Inc.'s credit ratings were cut to junk by Standard & Poor's, which said the move reflected "very weak housing conditions" and the Calabasas home builder's limited liquidity.

As the housing bubble was bursting in 2007, an analyst at credit rating firm Standard & Poor's made light of the situation with a song. He went from office to office serenading co-workers with his ode to America's deepening real estate crisis. "Strong market is now much weaker, subprime is boi-ling o-ver, bringing down the house," the analyst sang to the tune of the Talking Head's "Burning Down the House. " The scene was among the details - some meant to be embarrassing - released in government lawsuits against the world's biggest credit rating firm.

Standard & Poor's announced plans Friday to revamp its credit-rating process, as the New York-based agency and its rivals respond to criticism that they were too slow last fall to downgrade energy trader Enron Corp., which filed for bankruptcy in December. "Many of these changes have been underway since last fall, including publishing commentary more frequently so that the markets hear from us after routine events such as earnings calls and management changes," said Clifford Griep, S&P's chief credit officer.

Federal and state prosecutors sued the credit rating agency Standard & Poor's this week for allegedly defrauding investors by giving inflated ratings to complex mortgage-backed securities that proved all but worthless after the housing bubble burst. The cases raise difficult questions about the freedom to express an opinion without being held liable if it's wrong. Nevertheless, it's worth exploring whether S&P and its rivals deliberately soft-pedaled how risky those securities were in order to boost their bottom lines.

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Standard & Poor's said its long-term ratings for nearly all countries in the Eurozone, including economic powerhouse Germany, were at risk of downgrade because of the ongoing debt crisis. The ratings company said Monday that it put the sovereign debt of 15 nations on a negative credit watch because "systemic stresses" have risen to the point that they are putting "downward pressure" on the region as a whole. Among the reasons were tightening credit, continued disagreements among policymakers about how to handle the crisis, a "rising risk" of a recession in the region in 2012 and high levels of government and household debt.

Moody's Investors Service slashed the credit ratings of more than a dozen giant global banks amid worries that Europe's economic turmoil could slow both profit and growth. The downgrades, announced after the close of U.S. financial markets Thursday, included Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley, Citigroup Inc. and Bank of America Corp. The move came as the 15 banks singled out by Moody's try to navigate through the European debt crisis, which could have a major effect on their trading businesses.

Credit-rating companies in the United States are beset by shortcomings, failing to act quickly enough to issue downgrades and not properly documenting ratings decisions, the Securities and Exchange Commission said in a report. The SEC said Thursday that the country's largest credit-rating firms — Standard & Poor's Corp., Moody's Investors Service and Fitch Ratings — did not follow their own policies in issuing ratings and failed to accurately document their decisions. This was the second report the SEC has issued about ratings firms, a responsibility the agency inherited under the Dodd-Frank financial reform act. The report evaluated the performance of rating companies from August 2010 through September 2011.

California's credit rating, already the lowest of the 50 states, may be cut again, Standard & Poor's warned Tuesday. As the debate over budget cuts drags on in Sacramento, S&P put its "A" grade on the state's $59 billion in general obligation bonds on "negative credit watch," meaning the rating is at risk of a downgrade.

Standard & Poor's is set to downgrade the credit ratings of France and other Eurozone countries, France's finance minister confirmed Friday. France, which is Europe's second-largest economy behind Germany, will be lowered one notch to AA-plus from its previous stellar AAA rating. France will then have the same credit rating as the U.S., which was downgraded by S&P in August . Standard & Poor's plan, announced late Friday afternoon on French television by the nation's finance minister, Francois Baroin, was somewhat expected since S&P warned in December that it might cut the ratings.

WASHINGTON -- Justice Department officials and attorneys general from California and several other states were set Tuesday morning to announce a landmark civil suit against Standard & Poor's Corp. concerning the company's credit ratings of troubled mortgage-backed securities before the financial crisis. U.S. Atty. Gen. Eric H. Holder Jr., along with California Atty. Gen. Kamala Harris, and the attorneys general of Connecticut, Delaware, Mississippi, Illinois and Iowa were scheduled to hold a news conference in Washington at 8:15 a.m. PST. The attorney general of the District of Columbia also was set to appear.

WASHINGTON -- Standard & Poor's Corp. helped cause the financial crisis by misleading investors with falsely high credit ratings on bonds backed by toxic subprime mortgages, federal officials alleged Tuesday in announcing a civil suit against the company. S&P executives were motivated by a desire to increase the company's profits and delayed downgrading its AAA ratings on the mortgage-backed securities because it did not want to lose business from banks trying to package bad loans for sale to investors to get them off their books, Justice Department officials said.

Students borrowing money for college today are much likelier to default than people who took out loans just a few years ago, according to a new report. The student-loan delinquency rate in the last three years has risen to 15.1%, up from 12.4% from 2005 to 2007, according to FICO Labs, a unit of Fair Isaac Corp., which publishes consumer credit scores. That's a nearly 22% increase. The report is the latest red flag signaling that monstrous debt is a problem not only for students but potentially for the broader economy as well.

Canada's elevated housing prices and the extra debt taken on by consumers as a result could be problems for its banks should the economy hit bumps in the road, Moody's Investors Service said in downgrading its credit ratings for six major financial firms. Canada's banks are still highly rated, Moody's said Monday , tied for second place among the world's financial institutions, behind Singapore. The affected banks -- Bank of Montreal, Bank of Nova Scotia, Caisse centrale Desjardins, Canadian Imperial Bank of Commerce, National Bank of Canada and Toronto-Dominion Bank -- continue to have excellent credit ratings.

WASHINGTON - As Congress again veers close to the nation's debt limit, a leading credit rating company is delivering a stark warning: Don't wait until the last minute. Fitch Ratings said Tuesday that the U.S. could lose its AAA credit rating if lawmakers don't raise the $16.4-trillion debt limit in a "timely manner" as a possible default looms as early as mid-February. Congressional Republicans want major government spending cuts in exchange for another debt-limit increase. But Fitch, one of three major credit-rating companies, said the debt limit should not be used as leverage.

NEW YORK - Low interest rates pushed down by the Federal Reserve have opened a spigot of easy money to companies with less than sterling credit. The Fed, which signaled Wednesday that it would aggressively keep rates low until unemployment fell below 6.5%, has been pumping billions of dollars into the economy. And the historic rate drops are nudging investors into riskier investments. One place that has attracted investors is the debt of companies with non-investment-grade, or "junk," credit ratings.

Moody's Investors Service has cut the credit ratings of three major U.S. banks, saying that Washington is less likely to bail out big U.S. financial companies if another financial crisis were to hit Wall Street. The rating company Wednesday downgraded the long-term credit ratings of Bank of America Corp. and Wells Fargo & Co. and bumped down Citigroup Inc.'s short-term credit rating, citing "a decrease in the probability that the U.S. government would support" them in future financial crises.

Gap Inc.'s corporate credit and debt ratings were cut by Standard & Poor's and Moody's Investors Service on concern about the largest U.S. clothing chain's operating performance and increasing competition. The retailer's long-term corporate credit, senior unsecured debt and senior unsecured bank loan ratings were lowered to BBB+ from A by S&P. The ratings company set a "stable" outlook for Gap, which also owns the Banana Republic and Old Navy chains.

Credit-rating companies in the United States are beset by shortcomings, failing to act quickly enough to issue downgrades and not properly documenting ratings decisions, the Securities and Exchange Commission said in a report. The SEC said Thursday that the country's largest credit-rating firms — Standard & Poor's Corp., Moody's Investors Service and Fitch Ratings — did not follow their own policies in issuing ratings and failed to accurately document their decisions. This was the second report the SEC has issued about ratings firms, a responsibility the agency inherited under the Dodd-Frank financial reform act. The report evaluated the performance of rating companies from August 2010 through September 2011.