US probes Standard and Poor's over 2007 rating

Standard & Poor's is the subject of a US investigation over a rating it issued in 2007 on the eve of the financial meltdown, according to the agency's parent company McGraw-Hill. McGraw-Hill said in a statement it had received a "Wells Notice" last week informing it that the Security and Exchange Commission (SEC) was investigating S&P over its rating of a mortgage-backed investment. It added that the notice is "neither a formal allegation nor a finding of wrongdoing," and said S&P was cooperating with investigators. If the investigation leads to a case it would be the first legal action against a ratings agency in connection with the mortgage-backed securities that wrought havoc on the US financial system, according to the New York Times. The investment in question, Delphinus CDO 2007-1, was a package of collateralized debt obligations, which were widely blamed for the financial meltdown in 2008. S&P is the subject of a separate SEC investigation over its decision to downgrade the US credit rating last month for the first time ever. US President Barack Obama's administration angrily dismissed the move as the result of accounting errors -- allegations denied by the ratings firm -- while other critics said Standard & Poor's lost credibility by overrating toxic investments ahead of the 2008 financial crisis.