During a meeting at Standard & Poor's New York offices in the summer of 2012, analysts responsible for rating bonds tied to home loans were informed that their unit had sustained big losses in the previous quarter.
In a way, the news was not surprising. In the wake of the financial crisis, S.& P. was hesitant to rate most of the new bonds tied to residential mortgages, and for good reason. The agency and its rivals had been accused of helping to set off the crisis by giving their highest ratings to bonds backed by subprime mortgages that ended up suffering huge losses.
But as banks began reviving the market for the bonds in 2012, S.& P.'s tough stance was hurting the bottom line.