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

Fri Jan 13, 2017 9:41pm EST
 
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By Karen Freifeld

NEW YORK (Reuters) - Moody's Corp (MCO.N: Quote) 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.

"Moody's failed to adhere to its own credit-rating standards and fell short on its pledge of transparency in the run-up to the Great Recession," Principal Deputy Associate Attorney General Bill Baer said in the statement.

S&P Global's (SPGI.N: Quote) 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.

As part of its settlement, Moody's also agreed to measures designed to ensure the integrity of credit ratings going forward, including keeping analytic employees out of commercial-related discussions.

The rating agency's chief executive also must certify compliance with the measures for at least five years.

Moody's said that it stands behind the integrity of its ratings and noted that the settlement contains no finding of a violation of law or admission of liability.   Continued...

 
A screen displays Moody's ticker information as traders work on the floor of the New York Stock Exchange January 20, 2015. REUTERS/Brendan McDermid