S&P paying US$1.38b to settle ratings allegations
Print Edition
STANDARD & Poor’s is paying around US$1.38 billion to settle US government allegations that it knowingly inflated its ratings of risky mortgage investments that helped trigger the financial crisis.
The McGraw Hill Financial subsidiary Standard & Poor’s Financial Services LLC reached a settlement with the Justice Department over ratings issued from 2004 through 2007.
The settlement also resolves lawsuits filed by the attorneys general of 19 states and the District of Columbia.
McGraw Hill Financial Inc said the settlement contains no findings of violations of law by itself, S&P Financial Services or Standard & Poor’s Ratings Services.
The credit rating agency’s agreement represents one of the government’s key efforts to hold accountable market players deemed responsible for contributing to the worst financial crisis since the Great Depression. The settlement announced yesterday came after months of negotiations.
The Justice Department filed civil fraud charges against S&P two years ago this week, accusing the company of failing to warn investors that the housing market was collapsing in 2006 because doing so would hurt its ratings business.
“While this strategy may have helped S&P avoid disappointing its clients, it did major harm to the larger economy, contributing to the worst financial crisis since the Great Depression,” Attorney General Eric Holder said.
The Justice Department had demanded US$5 billion in penalties from S&P when it sued the company in February 2013. The payment of about US$1.38 billion to settle the case is less than S&P's revenue in 2013 of US$2.27 billion.
S&P, Moody’s Investors Service and Fitch Ratings were blamed for helping fuel the 2008 crisis with high ratings for high-risk mortgage securities.
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