S&P Biased Ratings Contribute to Financial Crisis

The Standard & Poor (S&P) rating agency manipulated its ratings to avoid disappointing its clients, however that resulted in major harm to the economy at large, contributing to the financial crisis.

WASHINGTON (Sputnik) — The Standard & Poor (S&P) rating agency skewed its ratings to avoid disappointing its clients, but the company’s actions contributed to worsening of the financial crisis, US Attorney General Eric Holder said in a statement Tuesday.

“While this strategy may have helped S&P avoid disappointing its clients, it did major harm to the larger economy, contributing to the worst financial crisis since the Great Depression,” Holder said in the statement.

Holder said Standard & Poor’s leadership ignored senior analysts’ warnings that the company had given top ratings to financial products failing to perform as advertised.

Holder added that the S&P ratings were affected by significant conflict of interest, given that its ultimate goal was to increase profits and market share to favor the interests of issuers over investors.

US agency responsible for enforcing federal security laws the Securities and Exchange Commission, said the S&P intentionally overestimated risky mortgage securities grades and banned it from grading bonds backed by commercial mortgages for one year.

S&P settled for $1.375 billion, of which has to pay the federal government a penalty of $687.5 million, the largest ever paid by a ratings agency, according to the statement.

Nineteen US states and the District of Columbia will obtain the remainder of the funds, statement read.

S&P is the world’s largest credit rating agency which, along with Fitch and Moody’s, accounts for nearly 95 percent of credit ratings around the globe.