US ratings agency Standard & Poor's (S&P) has launched a pre-emptive strike against the US Justice Department, saying it will "vigorously defend itself" against any legal action.

S&P is facing legal action by the US Department of Justice over the top ratings it gave to toxic mortgage bonds known as collateralised debt obligations (CDOs).

The bonds were sold around the world and almost brought down the world's financial system during the 2008 financial crisis .

US authorities have yet to launch the case, but S&P have gone public with a statement saying the Department of Justice (DoJ) was planning to file a civil action over assessments of CDOs made in 2007.

Financial risk analyst Satyajit Das says he thinks S&Ps moves are largely tactical.

"I think it's significant because for the first time you're having a government body take action against the rating agencies," he said.

"It is actually very curious that [S&P is defending itself] against actions which don't exist ... which suggests to me that this is actually a negotiating ploy on the part of the Department of Justice and, equally, S&P is responding to that.

In their statement, S&P says a lawsuit would be "without factual or legal merit".

"It would disregard the central facts that S&P reviewed the same subprime mortgage data as the rest of the market - including US Government officials, who in 2007 publicly stated that problems in the subprime market appeared to be contained, and that every CDO that DOJ has cited to us also independently received the same rating from another rating agency," the statement said.

"S&P deeply regrets that our CDO ratings failed to fully anticipate the rapidly deteriorating conditions in the US mortgage market during that tumultuous time."

Shares plummet

Shares in McGraw-Hill, the owner of S&P, have plummeted on Wall Street.

The top US ratings agencies S&P, Moody's, and Fitch have already been attacked for their role in rating toxic debts.

The ratings are meant to assess the risk of default but the agencies are paid by clients to judge their products.

In 2008, the US securities regulator said there were "significant weaknesses" in ratings practices, including conflicts of interest.

In November, in a landmark judgment in Australia, the Federal Court ruled that when they bought highly complex investments.

"The ratings agencies did not hold the fort," he said.

"They to a large extent bent with the wind and went along, and unfortunately trillions of dollars were lost as a result."

Mr Walker says IMF is backing another case on behalf of investors who bought investments in Europe.


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