S&P Lawsuit Undermined by SEC Rules That Impede Competition

The U.S. lawsuit against Standard & Poor’s raises pressure to accelerate competition in the ratings industry while the government itself has adopted rules that left the business dominated by the same companies whose flawed grades sparked the worst financial crisis since the Great Depression.

The Justice Department accuses McGraw-Hill Cos. and its S&P unit of deliberately understating the risk of bonds backed by mortgages made to the riskiest borrowers to win business from Wall Street banks. S&P, Moody’s Investors Service and Fitch Ratings provided 96 percent of all ratings for governments and companies in the $42 trillion debt market in 2011, versus 97 percent in 2008.