“The Justice Department barely finished announcing its $1.4 billion settlement with ratings agency Standard & Poor Financial Services Tuesday before critics blasted the deal as insufficient to safeguard against another bubble.
“S&P agreed to end the government’s lawsuit, brought in 2011, alleging it inflated ratings of mortgage-backed securities during the housing boom, thus fueling the financial crisis.
“As part of the deal, S&P agreed to pay $1.375 billion, a penalty the Justice Department called “record-setting.” It also admitted to certain facts laid out by the government, including that decisions on its rating models were affected by business concerns.
“But the deal fell short of finding that S&P violated the law, which has critics lamenting that it does nothing to change the conflicts of interest the government said led to its case.
“Penalizing for past offenses is always good. But we need a new system to prevent the problem in the future,” said Congressman Brad Sherman (D-Calif.).”
“How can you be a tough grader when the way to make millions is to get a reputation being an easy grader?” Sherman said of the current system, which has sellers of debt and other securities also pay for their ratings.
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“Dennis Kelleher, president and CEO of Better Markets, a non-profit group that advocated for financial reform in the wake of the financial crisis, took issue with the fact that the deal didn’t hold anyone individually responsible.
“For what is allegedly years of egregious, reckless conduct, all the DOJ reportedly got was a big dollar settlement and big headlines,” said Kelleher. “Not one individual [was] punished.”
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Read the full USA Today article by Kaja Whitehouse here.
