Fiscal policy

S&P Claims Federal Lawsuit Retaliation for Credit Downgrade

Not because of toxic mortgages


SANTA ANA, Calif. - The government's $5 billion lawsuit against Standard & Poor's is a "meritless" action filed in retaliation for downgrading the nation's credit rating to AA+ from AAA, the credit-rating agency claims in its defense.

In a legal response filed Tuesday, S&P denied allegations that it misled federally insured banks and credit unions by rubber-stamping toxic mortgage-backed securities with the agency's top investment grade.

The company suggests the government's action is politically motivated, and says the lawsuit violates its free speech rights, and is "meritless" and "unconstitutional."