An often-ignored financial reform law is getting its moment in the spotlight, thanks to a Department of Justice (DOJ) lawsuit against Standard & Poor’s Ratings Services (S&P).

The Financial Institutions Reform Recovery and Enforcement Act of 1989 (FIRREA) allows the federal government to levy civil penalties for violations of criminal laws that deal with a federally insured financial institution. Passed in the wake of a savings and loan crisis that wiped out more than 700 savings and loan associations and cost the government billions, FIRREA has now been revived by the DOJ, which is suing S&P for allegedly flouting company standards when rating mortgage bonds, many of which collapsed during the 2008 financial crisis.

One of the advantages FIRREA offers prosecutors is that, as a civil suit, it demands only that the government prove its case using the “preponderance of the evidence” civil standard, rather than the heightened “beyond a reasonable doubt” criminal standard. Under the law, the government can also collect penalties that are equal to the amount that the offending party gained or to the amount that the victim lost.

For S&P, that amount could total in the billions. But Floyd Abrams, an attorney for S&P, maintained in a CNBC interview on Tuesday that “there was no fraud because the ratings that were issued…were believed by the people who issued them and that’s what the government has got to disprove.”

Read more at the Wall Street Journal Law Blog.

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