Moody’s pays $864 million to U.S., states over pre-crisis ratings

Moody’s Corp has agreed to pay nearly $864 million to settle with U.S. federal and state authorities over its ratings of risky mortgage securities in the run-up to the 2008 financial crisis, the U.S. Department of Justice said on Friday. The credit rating agency reached the deal with the Justice Department, 21 states and the District of Columbia, resolving allegations that the firm contributed to the worst financial crisis since the Great Depression, the department said in a statement.

S&P Global’s Standard & Poor’s entered into a similar accord in 2015 paying out $1.375 billion. Standard and Poor’s is the world’s largest ratings firm, followed by Moody’s. Moody’s said it would pay a $437.5 million penalty to the Justice Department, and the remaining $426.3 million would be split among the states and Washington, D.C.

Moody’s settlement on Friday resolved the Justice Department probe without a federal lawsuit. In the Standard & Poor’s case, resolution was reached after the U.S. filed a $5 billion fraud suit.

Connecticut’s lawsuit claimed that Moody’s ratings were influenced by its desire for fees, despite claims of independence and objectivity. It also accused Moody’s of knowingly inflating ratings on toxic mortgage securities.

— source cnbc.com

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