The state of Illinois is suing Standard & Poor’s for its alleged role in the housing market crash. Attorney General Lisa Madigan says S&P committed fraud by claiming its ratings of mortgage-backed securities were objective and independent. She says they were not.
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“The concept behind a rating agency is to give investors some sense, what is supposed to be an objective, independent sense, of is this a good credit risk or is it a bad risk? Many of these mortgage-backed that were extremely risky were given the highest rating available by S&P, a triple-A rating,” she said. Madigan says she has evidence from internal communication at S&P that the firm rated securities higher in order to gain and keep the business of the seller of the securities in question. Madigan says not only is S&P culpable for the housing market crash, but investors in mortgage-backed securities were deceived. S&P says the case has no merit. Connecticut also has a suit pending against S&P. The Illinois suit was filed Wednesday in circuit court in Cook County.