Standard & Poor's agrees to pay a billion and a half dollars to dismiss the charges related to the case subprime, from which the 2008 financial crisis originated. The rating agency had ended up in the crosshairs of the US authorities for assigning inflated ratings (in many cases the famous "triple A") to derivative products linked to real estate loans with a very high risk of insolvency.
In summary, the banks encouraged their customers to use the houses as if they were ATMs, through series of mortgages: the new loans served to pay off the previous ones and being of a higher amount (because in the meantime the price of the houses had risen) they allowed families to pocket the difference. As soon as house prices stopped rising, the mechanism got stuck. Too bad that, while they were selling subprime, the institutions were issuing complex financial securities guaranteed by those very mortgages. Derivatives which they then sold knowing that they were dealing with waste paper (because it was clear that the subprime would never be covered), but making investors believe that it was a deal. All thanks to the complicity of rating agencies, That (paid for by the banks themselves, and then into conflict of interest) gave those titles a rating of high reliability.
McGraw Hill Financial, the company that controls S&P, has announced that the agency will pay to file the allegations on the subprime front $678,5 million to the US Justice Department (the highest amount ever paid by a rating agency in a settlement) and another 687,5 million to 19 states of the Union and the District of Columbia, where the capital Washington is located. Another $125 million will be paid to settle a separate lawsuit with the California Public Employees' Retirement System (Calpers, one of the largest US pension funds).
As part of the agreement, S&P did not admit to the violations. The agreement was signed "to avoid delays, uncertainty, inconvenience and expenses related to further legal proceedings", reads a note from the company, which says it has opted for the settlement in the interests of the group and its shareholders.
Unlike the big banks, which collectively paid more than $100 billion to file lawsuits related to their conduct during the crisis, the rating agencies have largely remained on the sidelines of investigations. The US Justice Department, having closed the case with S&P, will now go on the attack Moody's Investor Service.
