Financial Crisis, Lawsuit | featured news

Standard & Poor's Corp. helped cause the financial crisis by misleading investors with falsely high credit ratings on bonds backed by toxic subprime mortgages, federal officials alleged Tuesday in announcing a civil suit against the company.

The Justice Department and state prosecutors plan to file civil charges against Standard & Poor’s Ratings Service, accusing the firm of fraudulently rating mortgage bonds that led to the financial crisis, people briefed on the plan said.

Citigroup said on Wednesday that it had agreed to pay $590 million to settle a class action lawsuit brought by shareholders who contended that they had been misled about the bank’s exposure to subprime mortgage debt on the eve of the financial crisis.

Ratings firms won another victory against legal claims that they should be held responsible for billions of dollars in losses suffered by investors during the financial crisis. A three-judge panel of the U.S. Court of Appeals for the Second Circuit ruled that Moody's Corp., Standard & Poor's, and Fitch Ratings can't be held liable for their ratings of mortgage-backed securities.

Wells Fargo agreed to pay $100 million to Citigroup to settle all claims related to its $15-billion deal to acquire Wachovia in the midst of the financial crisis.