Attorney General Jim Hood issued the following statement.
AG HOOD SECURES $26 MILLION FOR MISSISSIPPI IN SETTLEMENT WITH MOODY’S
Rating service to pay nearly $864 million to states, federal government over claims of deceptive conduct
JACKSON—
Attorney General Jim Hood announced today that Moody’s will pay
Mississippi more than $26 million to settle allegations that the credit
rating agency engaged in deceptive conduct during the height of the
financial crisis.
Moody’s
Corporation, Moody’s Investors Service, Inc., and Moody’s Analytics,
Inc. agreed to pay a total of $863,791,823 to 21 states, the District of
Columbia and the federal government to resolve claims that Moody’s
misrepresented its independence and objectivity when rating structured
finance securities. Attorney General Hood’s lawsuit alleged that Moody’s
ratings of structured finance securities were tainted by the company’s
drive to win business and its concerns for
market share. Structured finance securities, particularly those
comprised of sub-prime mortgages, were at the center of the financial
crisis.
In
addition to the monetary settlement, Moody’s has agreed to take specific
compliance measures intended to prevent the same problems from ever
reoccurring.
Attorney
General Hood and Connecticut Attorney General George Jepsen led the
investigation in conjunction with the U.S. Department of Justice. The
two AGs also led the multistate litigation against Standard &
Poor’s,
which culminated in a $1.375 billion settlement for 20 states and the
federal government in 2015. Standard & Poor’s is a competitor of
Moody’s. Mississippi received $33 million in the settlement with
S&P.
“Moody’s
reckless conduct went unchecked for years, feeding a subprime mortgage
bubble,” Attorney General Hood said. “While Moody’s profited handsomely,
the economy crumbled as people lost their homes.
Pension funds, retirement funds, and other investment vehicles in
Mississippi and across the country lost billions of dollars as the value
of securities with inflated ratings plummeted. This settlement is
another important step toward holding accountable those
responsible for our mortgage crisis.”
The
settlement is the successful culmination of five years of hard-fought
litigation for Mississippi, Attorney General Hood said. In 2011, the
Attorney General sued both Moody’s and Standard & Poor’s for
violations
of the Mississippi Consumer Protection Act. The lawsuit alleged that
the companies misrepresented their independence and objectivity when
rating structured finance securities,
including residential mortgage-backed securities (RMBS)
and collateralized debt obligations (CDOs), which derive their value
from the monthly payments consumers make on their mortgages.
Mississippi’s
lawsuit alleged that Moody’s assigned inflated credit ratings to toxic
assets packaged and sold by the Wall Street investment banks in an
effort to curry favor, continue and grow business
with these banks. This alleged misconduct mainly occurred between 2004
and 2007, though it began as early as 2001.
Moody’s
represented to consumers that its Aaa rating, its highest rating,
carried a lower level of risk than other ratings. The Attorney General
alleged that Moody’s manipulated its process so that, in reality,
the Aaa rating represented a greater risk than Moody’s disclosed to
investors. The lawsuit asserts that Moody’s gave in to pressure from
big banks, which were powerful, repeat customers that paid Moody’s
millions of dollars to rate these securities. The
banks needed Aaa ratings in order to sell these securities to
institutional investors, such as pension funds and retirement plans.
“This
was a complex case that involved reviewing hundreds of thousands of
documents and interviewing dozens of former Moody’s executives in order
to understand the full range of this misconduct,” Attorney General
Hood said. “I appreciate Attorney General Jepsen and his office, as
well as the U.S. Department of Justice, for their partnership. This was a
successful federal-state collaboration that demonstrates our commitment
to ensuring consumers have a level playing
field against powerful corporate interests.”
As
part of the settlement, Moody’s has agreed to a detailed statement of
facts in connection with the way it rated RMBS and CDOs leading up to
the financial crisis, and significant compliance terms – including
an annual certification by the CEO of Moody’s Corporation, which will
be provided to Mississippi every year for the next four years,
certifying that Moody’s will follow certain compliance commitments.
These compliance measures are designed to address conflicts
of interest and to protect the integrity and transparency of rating
methodologies in order to prevent the problems that created the 2008
financial crisis from occurring again.
“The
credit rating industry was essentially unregulated when we started this
case,” Attorney General Hood said. “Since then, the SEC implemented
rules in 2014 that came about largely as a result of our litigation
against S&P. In total, the credit ratings agencies have paid the
states and federal government $2.2 billion to settle our claims of
deceptive conduct and violations of federal law. This is a substantial
sum that will deter similar misconduct in the future.
Just as importantly, these settlements have shifted core policies and
procedures in the credit rating industry such that Moody’s and S&P
now operate in a way that is more transparent, independent and
objective. Consumers and the investing public have better
protections as a result of our successes here.”
In
addition to Mississippi, the states involved in the settlement are
Arizona, California, Connecticut, Delaware, Idaho, Illinois, Indiana,
Iowa, Kansas, Maine, Massachusetts, Maryland, Missouri, New Hampshire,
New Jersey, North Carolina, Oregon, Pennsylvania, South Carolina and
Washington as well as the District of Columbia.
12 comments:
Excellent work by the General. Compare to SOS Hoseman meager penalty against Morgan Stanley!
Did the State of Mississippi lose money as a result of Moodys actions? If citizens lost money, will the proceeds be paid to them? I do not understand this.
Why doesn't Morgan Stanley just pay for four patrol schools --- one at each of the four state academies?? Yes, there are four law enforcement academies in the state.
3:10
Sign that guy up!
Or will attorney fees swallow a good chunk of the award.
who was the n"of counsel" private attorney on this deal?
I would like to see the pigs fighting in the traugh when hood dumps the cash in.
I made 33% of the fee.....so after taxes I net about 6 million.
Thanks guys.
Headed to Europe for a few years....y'all enjoy Trump and a 10,000 Dow plunge and real estate collapse.
Gee, where are all the Hood bashers that commented on the Google suit?
Better to have money to spend than to not win and have none.
The question is whether or not the AGs office had the hours needed and expertise needed to win this suit and if not, why not?
And, the same is true for Hoseman. Would the added expense justify a different approach.
So weary of those of you who just are party hacks or so gullible as to believe anything fed to them by the hacks.
You don't want good government. You just want your party to win no matter how awful the candidate because you will feel empowered and in control or you can't entertain that you and your party aren't always right about everything!
You don't care if your party member does something stupid, you'll rationalize it or spin it. But, you'll exaggerate mistake in word or deed by the other party.
Hate to break the news to you loyalists or egoistical folks, but your parties are made up of humans. Human are not perfect. Humans do the best they can with the tools they have even when they are doing their best.
Please try to look at your own biases first, not last and look for reality, not what you want to believe is true. Look to your own imperfections and biases first.
8:03, no question the economy, the stock market and the real estate market have been in a bubble due to near zero interest rates. All to prop up Obama and hide the effects of his tyrannical regulations and tax increases.
8:03 did you happen to notice how the stock market jumped as soon as Trump won the election? How about all of the companies who decided to put Americans back to work.
10:12 AM
yes..all of the companies who said trump had no effect whatsoever on their years long plans to build plants here....if you wish to believe the con man in chief every time he points to a hire....that's certainly your right....but most people know hes a blowhard.
Anybody who studied business knows trade wars are bad for the economy and tariffs cause depressions.
I hope you have a cane pole and like to eat catfish....because Trump is going to ruin this place.
Funny that the companies were leaving the U.S. when Obama was president but as soon as Trump was elected things started to change.
What trade wars? Getting a better trade deal isn't trade wars. Obama just never had a real job or owned anything the govt. didn't give him. It was hard for him to do something he knew nothing about. Tariffs causing depression. Where did you go to school?
Just knowing Trump will change many things Obama did has caused this country to start looking ahead. More people working, companies building new plants, stock market setting records.
Don't let your sour grapes keep you from benefitting from a better economy.
Hillary for dog catcher.
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