CHICAGO (CBS) — Illinois Attorney General Lisa Madigan has joined the federal government and 13 other attorneys general in suing for changes in the way Standard & Poor’s rates mortgage bonds.
WBBM Newsradio’s John Cody reports Madigan’s office wants S&P to rate bond quality fairly and independently, and she accused S&P of rating bonds to keep its clients happy, and the fees rolling in – not to accurately assess their risk.
She insisted it wasn’t simply a lapse in professional judgment.
“The evidence shows very strongly that the considerations that went into ratings were really driven by their business concerns,” she said.
Madigan said transcripts of S&P conversations made the attitude clear.
“You literally have employees basically saying, ‘You know, we could have a deal structured by cows, and we would rate it,’” she said.
Madigan rejected any notion she’s unfairly targeting S&P, while giving a pass to lenders that promoted subprime mortgages which led to market collapse.
“This is just one in a series of lawsuits that have been against the banks, the large lenders, and other market participants that were involved in the financial collapse that we’ve all been devastated by,” she said.
She said she believes the lawsuit will shake up S&P practices.
“One: restitution. Two: we want to make sure that there are significant changes made to the business model,” she said.
Madigan said she wants to ensure this type of conduct can’t happen again; “that they are required, in fact, to be independent and objective in their ratings, and that the business considerations of trying to expand their market share and increase their profits are not what drive their ratings.”
Madigan said the legal action against S&P has been in the works for years, and is not payback for the agency’s downgrading of U.S. government bonds and Illinois’ credit rating.