The Justice Department is seeking to advance a more-than-five-year probe into whether Moody's Investors Service inflated ratings during the U.S. housing boom, according to three people familiar with matter.
The U.S. government is continuing interviews with former Moody's executives on whether the credit rater bent criteria on how to assess structured-finance products to win business from Wall Street banks, according to two people familiar with the matter. They asked not to be identified because the investigation is ongoing. It's unclear whether the probe will result in a lawsuit, and any action against the company wouldn't be imminent, one of the people said.
The U.S. is wrapping up a case against Moody's main competitor, Standard & Poor's, as soon as this week, people familiar with the matter have said. The unit of McGraw Hill Financial Inc. may pay about $1.4 billion to resolve claims it bent its ratings criteria to win business. The world's largest credit rater will not admit wrongdoing, one of the people said.
Anthony Mirenda, a Moody's spokesman, didn't return a request for comment outside of business hours. Patrick Rodenbush, a spokesman for the Justice Department, declined to comment. The
Moody's has had success defending lawsuits. Of the almost five dozen that have been filed since 2007, fewer than a quarter of those cases remain, Moody's General Counsel John Goggins said on an investor call in September.
Ratings companies were blamed in a Senate investigation for helping trigger the financial crisis by awarding top grades on bonds backed by subprime mortgages to win business from Wall Street banks. Downgrades on the securities helped wipe out almost $11 trillion of household wealth, the Financial Crisis Inquiry Commission said in its 2011 report.
The Justice Department sued S&P in 2013, accusing the firm of inflating grades on mortgage-backed securities half a decade earlier and of lying about its rankings being free from conflicts of interest.
