The US Department of Justice has launched a probe into Moody’s Investors Service for allegedly issuing optimistic risk assessments in an excessive manner on the mortgage agreements before the Great Recession in 2008.
The Wall Street Journal on Monday reported that the investigations into Moody’s became shortly public before the Justice Department announced a record fine, which is likely to exceed USD 1.3 billion, being levied on Ratings Services of Standard & Poor for similar practices.
The federal authority has spent months in meeting behind the closed doors with former employees of the rating agency as part of the probe into how it has prepared mortgage deals’ risk assessments prior to the 2008 financial meltdown.
The news daily reported that the federal probe is currently in the initial phase and therefore it’s unclear whether or not Moody’s will face any lawsuit against it. Whatever be the case, the newspaper reports, the US authorities are keeping a close eye on the activities of the company since 2010.
On the other hand, the Justice Department is about to close its case filed against Standard & Poor’s.
A civil lawsuit was filed by the government against S&P in 2013 for knowingly deceiving its investors over the quality of securities backed by its mortgage and other investments in the years before bursting of the financial bubble.