USDOJ Launches Probe of Moody’s Investors Service’s “Optimistic” Risk Assessments
The U.S. Department of Justice (USDOJ) has just launched an investigation into Moody’s Investors Service for allegedly issuing overly optimistic credit ratings on mortgage-backed securities before the 2008 financial meltdown.
According to The Wall Street Journal, the probe into Moody’s became public right before the Justice Department announced their record-breaking fine of $1.375 billion levied against Standard & Poor’s (which we blogged about here). In that matter, a civil lawsuit was filed by the government against S&P in 2013 for knowingly deceiving investors over the quality of mortgage-backed securities in the years before the financial bubble burst.
The USDOJ spent months meeting with former employees of the rating agency to determine how the agency assessed mortgage deals’ risk prior to the 2008 financial meltdown. At this stage, it appears that the USDOJ’s investigation is still in the preliminary stages and it is unclear if or when legal action will be taken.
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