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Market Update

S&P Agrees to Lowered $1.37 B Settlement


Author: Nichole Harper
ticker.com
Last Update: 3:06 PM ET February 03 2015

Standard & Poor’s and Justice Department as well as 19 state attorneys general and the District of Columbia agreed to settle charges related to accusation linked to the rating agency’s conduct in the housing market bubble that led to a broader economic collapse of global around the world.

S&P’s agreement, to pay $1.37 billion that will be equally shared between federal and state governments, comes after two years of legal challenge that was put in motion by Attorney General Eric H. Holder Jr.

The settlement, though substantially smaller than $3.2 billion demanded by the government, amounts to three times what the rating agency offered to pay when the investigation began.

Many analysts believe that the rating agency played a central role in inflating ratings of risky securities that led to widespread abuses in the housing market and view the settlement as too little.

The total amount agreed by S&P will amount to only one year of profit of the company and also highlights a changed view at the top of the rating agency after several years of protracted legal battle with the government.

With this final settlement which is not subject to judicial review, the U.S. government has been winding down its several investigation that led to the housing market bubble that ended with a broad economic collapse and led to six million people losing jobs.

S&P, like many other financial firms that were charged by the government, did not agree with the charges but only compromised on a statement of facts and agreed to pay a fine.

Other financial firms collectively have paid a total of $40 billion in fines but not a single executive, at these firms including the leading rating agency S&P, has been charged or has been jailed.

From the collected fines of $40 billion, not a single investor has been compensated by the U.S. government or its agencies that led to losses leading to several hundred billion dollars.

The government appointed commission that investigated financial and economic crisis described the leading rating agency as “essential cog in the wheel of financial destruction.”

The statement released by S&P said that “after careful consideration, the company determined that entering into the settlement agreement is in the best interest of the company and its shareholders.”

Attorney General Holder said at a news conference today that the leadership of S&P “on more than one occasion ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised.”

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc