Washington state joins federal lawsuit over financial crisis

Washington is joining a dozen other states in a lawsuit against Standard and Poor’s, the credit rating agency.

The State Attorney General’s office claims Standard and Poor’s misled investors and inflated the value of residential sub-prime mortgage-backed securities that were at the center of the nation’s financial crisis.

“The people that were signed up for those mortgages were unable to pay for those mortgages and so the mortgages went bad and because the mortgages went bad, the security went bad,” explained Assistant State Attorney General Todd Bowers.

Washington is joining a U.S. Justice Department lawsuit and will ask a court to force Standard and Poor’s to change the way it does business.

“They frankly didn’t do their job, despite their many, many, many public representations that their evaluation of the risks inherent in that security was independent and reliable,” alleged Bowers.

The state of Washington filed a complaint Tuesday in Snohomish County Superior Court.

S&P, which is a unit of McGraw-Hill Cos., has denied wrongdoing.

For now, state Attorney General Bob Ferguson says the state of Washington wants Standard and Poor’s to refrain from making false representations to the public.

“As we go forward and do further investigation, we’ll be looking at the potential for civil penalties as well as we look at specific individuals who may have been harmed by Standard and Poor’s,” said Ferguson.

It’s a large case, the stakes are high and Bob Ferguson would not offer a guess about how long it will take to resolve.