The US justice department is investigating Standard & Poor's rating of mortgage securities in the run-up to the financial crisis.
The New York Times reported the investigation began before S&P, the nation's largest credit ratings agency, cut the US's highly prized AAA credit rating earlier this month.
The justice department has been asking about instances in which the agency's analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S&P business managers.
It is unclear whether the investigation also involves the other two credit ratings agencies, Moody's and Fitch.
During the boom years, the ratings agencies made bumper profits as they awarded top ratings to bundles of troubled mortgage loans, which made them appear less risky. The agencies have been heavily criticised for failing to anticipate problems with the mortgages, which triggered the global financial crisis.
this might be a stupid question but can you give a brief explanation about this AA+ and AAA stuff ?
ResponderEliminarhi.... this is not a stupid question.
ResponderEliminarWhat do the letter ratings mean?
The general meaning of our credit rating opinions is summarized below.
‘AAA’—Extremely strong capacity to meet financial commitments. Highest Rating.
‘AA’—Very strong capacity to meet financial commitments.
‘A’—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
‘BBB’—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
‘BBB-‘—Considered lowest investment grade by market participants.
‘BB+’—Considered highest speculative grade by market participants.
‘BB’—Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
‘B’—More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
‘CCC’—Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
‘CC’—Currently highly vulnerable.
‘C’—Currently highly vulnerable obligations and other defined circumstances.
‘D’—Payment default on financial commitments.
Note: Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories
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