Nearly a decade after credit rating agencies fed a subprime mortgage frenzy that imperiled the global economy, one of the industry’s biggest players faces a costly reckoning.
Standard & Poor’s, a rating agency accused of inflating its assessment of mortgage investments that spurred the 2008 financial crisis, said Tuesday that it had agreed to pay $1.37 billion to settle wide-ranging civil charges from the Justice Department as well as 19 state attorneys general and the District of Columbia.
S&P also signed a statement of facts that outlined its role in the mortgage crisis, but the ratings agency did not admit to wrongdoing, securing a major concession from the government.
The settlement, which does not require judicial approval, all but closes the books on one of the government’s signature Wall Street cases. The Justice Department sued S&P two years ago this week, setting in motion a wave of lawsuits from states across the country.
The government’s decision to settle signals that its pursuit of crisis era misdeeds has entered a final stage. The settlement of the S&P case, coming on the heels of banks and other financial firms collectively paying more than $40 billion to end federal and state investigations, was among the government’s few remaining items of unfinished business from the crisis.
“The settlement we have reached not only makes clear that this kind of conduct will never be tolerated by the Department of Justice, it also underscores our strong and ongoing commitment to pursue any company or entity that violated the law and contributed to the financial crisis of 2008,” Attorney General Eric Holder said at a news conference Tuesday.
As for S&P, he said that “on more than one occasion, the company’s leadership ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised.”
In its own statement, S&P said that “after careful consideration, the company determined that entering into the settlement agreement is in the best interests of the company and its shareholders and is pleased to resolve these matters.”
In a separate settlement also announced Tuesday, S&P agreed to pay the California Public Employees’ Retirement System, the large public pension fund, $125 million to resolve claims over ratings of three investment deals. Like the Justice Department case, the terms of the CalPERS settlement are not subject to judicial approval.