S&P has used this as a defense. Floyd Abrams, the Cahill Gordon & Reindel LLP lawyer representing the company, said in a Feb. 5 appearance on Bloomberg Television that investors required two ratings on CDOs before they would buy.

“And yet we find ourselves now being accused of acting in bad faith, while everyone else acted in good faith, presumably,” he said on the “Lunch Money” program with Sara Eisen. He said on CNBC the same day that the Justice Department’s investigation intensified after the S&P downgrade, though he didn’t know if there was a direct link. “No one in the government has come to me and said, ‘That’s why we did it,’” Abrams said.

Ed Sweeney, an S&P spokesman, declined to elaborate on Abrams’s comments.

Attorney General Eric Holder said Feb. 5 in Washington that the complaint against S&P was unrelated to the downgrade.

“There’s no connection between the two,” he said. “They did what they did, assessing what the creditworthiness was of this nation. We looked at the facts, the law and the investigation” and “made a determination that the filing of these lawsuits was appropriate.”

Shares Tumble

McGraw-Hill has dropped 24.9 percent in New York trading this week, set for the biggest weekly decline in data going back to August 1980. The stock lost 23.8 percent in the week ended Oct. 10, 2008, during the height of the global financial crisis. Moody’s has decreased 15.1 percent in the same period, poised for the biggest retreat since the week ended Sept. 25, 2009.

Yields on McGraw-Hill’s $400 million of bonds due November 2037 have increased 34 basis points this week to 5.78 percent, the highest level since March, according to Trace, the bond- price reporting system of the Financial Industry Regulatory Authority. Yields on Moody’s $500 million of securities due September 2022 advanced 8 basis points to 4.095 in the period.

$2.8 Trillion

S&P rated more than $2.8 trillion of residential mortgage- backed securities and about $1.2 trillion of CDOs from September 2004 through October 2007, according to the complaint. Many were rated AAA. S&P downplayed the risks on portions of the securities to gain more business from the investment banks that issued them, the U.S. said.