S&P braces for federal suit

Standard & Poor's, the credit-rating agency, said Monday it was braced for a Department of Justice civil suit pertaining to its rating of mortgage bonds prior to the 2008 economic collapse. The suit, if filed, will be the first of its kind.

S&P and its main rivals, Moody's Corp's (MCO.N) Moody's Investors Service and Fimalac SA's (LBCP.PA) Fitch Ratings, have long faced criticism from investors, politicians and regulators for assigning high ratings to thousands of subprime and other mortgage securities that quickly turned sour.

"Critics say rating agencies have an inherent conflict of interest: They're paid by the companies whose products and credit they rate. The agencies have been accused of issuing unduly high ratings before the crisis because of pressure from banks they wanted as clients," (emphasis added) the Associated Press wrote.

PS. Here is confirmation of the suit.