Nearly a decade after credit ratings agencies became a symbol of a financial crisis they helped create, one of the industry’s biggest players faces a costly reckoning.
Standard & Poor’s, a ratings agency accused of inflating its assessment of mortgage investments that spurred the 2008 crisis, announced on Tuesday that it had agreed to pay $1.37 billion to settle civil charges from the Justice Department and from 19 state attorneys general and the District of Columbia.The settlement, which does not require judicial approval, signals that the investigation of crisis-era misdeeds has entered a final stage.The S.&P. settlement, on the heels of banks and other financial institutions 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. No other ratings agency has faced a Justice Department lawsuit, though prosecutors continue to investigate actions by Moody’s.
For S.&P., the settlements provide some peace in a process rife with animosity. After years of lowball offers and invective — S.&P. contended the Justice Department’s case was “retaliation” after it cut the stellar AAA credit rating of the United States in 2011— it was unclear if the ratings agency would ever back down.But in a statement of facts with the settlement, the company acknowledged that “the voluminous discovery provided to S.&P. by the United States to date” does not “support its allegation” that the Justice Department acted out of spite. S.&P. agreed to withdraw that allegation.
“The settlement we have reached today 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 H. Holder Jr. said at a news conference on Tuesday.
Such outcomes — $1 billion is now a floor, not a ceiling for a settlement — have led Wall Street lawyers to criticize what they call a government shakedown.
And yet, some lawmakers complain that the civil lawsuits are a slap on the wrist for companies that helped ignite the worst financial crisis since the Great Depression. Not one top executive at S.&P., or any major Wall Street firm, was charged criminally for the misdeeds during the era.