Business

S&P Close to $1.37B Deal Over Risky Mortgage Bond Ratings

Published

11 years ago

January 29, 2015

This Oct. 9, 2011, file photo shows Standard & Poor’s rating agency in New York. Standard & Poor’s is close to a $1.37 billion settlement with the Obama administration and U.S. states over allegations it knowingly inflated its ratings of risky mortgage investments that helped trigger the financial crisis. (AP Photo/Henny Ray Abrams, File)

MARCY GORDON, AP Business Writer

WASHINGTON (AP) — Standard & Poor’s is close to a $1.37 billion settlement with the Obama administration and U.S. states over allegations it knowingly inflated its ratings of risky mortgage investments that helped trigger the financial crisis.

The credit rating agency is expected to sign an agreement to settle with the Justice Department and about 20 state attorneys general, a person familiar with the matter said Wednesday. The person spoke on condition of anonymity because the settlement isn’t finalized and hasn’t been announced. It may be completed next week, the person said.

John Piecuch, a spokesman for New York-based S&P, a division of McGraw Hill Financial Inc., said the company declined to comment.

The settlement would resolve civil charges filed nearly two years ago accusing S&P of failing to warn investors that the housing market was collapsing in 2006 because doing so would hurt its ratings business.

According to the lawsuits filed by the Justice Department and nearly two dozen states, S&P gave high ratings to the securities backed by risky mortgages because it wanted to get more business from the big banks that issued them.

The Justice Department suit against S&P was one of the Obama administration’s most aggressive actions against those deemed responsible for contributing to the worst financial crisis since the Great Depression, and it followed years of criticism that the U.S. government had failed to do enough to hold financial-market players accountable.

The Justice Department had demanded $5 billion in penalties from S&P when it sued the company in February 2013. A payment of $1.37 billion to settle the case would be less than S&P’s revenue in 2013 of $2.27 billion.

The three big rating agencies — S&P, Moody’s and Fitch — have been blamed for helping fuel the 2008 crisis by giving high ratings to high-risk mortgage securities. The high ratings made it possible for banks to sell trillions of dollars’ worth of those securities — some investors, such as pension funds, can only buy securities that carry high credit ratings.

But those investments soured when the housing market went bust in 2006.

Experts have said the Justice Department lawsuit against S&P could serve as a template for action against Fitch and Moody’s.

S&P disputed the government’s allegations when the federal suit was filed, calling the legal action “meritless” and the claims “simply not true.” The company insisted its ratings were based on a good-faith assessment of the performance of home mortgages during a time of market turmoil. S&P also accused the government of filing the lawsuit against it as “retaliation” for its downgrade of the United States’ credit rating in 2011.

The Wall Street Journal, citing unidentified people familiar with the situation, reported earlier Wednesday that the settlement amount would likely be $1.37 billion.

Last week, S&P agreed to pay the federal government, New York state and Massachusetts more than $77 million to settle separate charges by the Securities and Exchange Commission related to its ratings of high-risk mortgage securities after the crisis. The SEC had accused S&P of fraudulent misconduct, saying the company loosened standards to drum up business in 2011 and 2012.

S&P neither admitted nor denied the charges in the settlement.

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Financial Wellness and Mental Health: Managing Money Stress in College 

While everyone’s financial situation is unique, several common sources of stress have the potential to strain your financial health. These include financial and economic uncertainty, existing debts, unexpected expenses, and mental or physical health changes. Financial stress may differ from situation to situation, but understanding the factors contributing to yours may help you begin to craft a plan for your unique circumstances.

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March 17, 2026

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As a college student, managing financial responsibilities can be stressful.

If you’ve found yourself staying up late thinking about your finances or just feeling anxious overall about your financial future, you’re not alone. In one survey, 78% of college students who reported financial stress had negative impacts on their mental health, and 59% considered dropping out. While finances can impact overall stress, taking steps to manage your finances can support your mental, emotional and physical well-being.

When it comes to money, the sources of stress may look different for each student, but identifying the underlying causes and setting goals accordingly may help you feel more confident about your financial future.

Consider these strategies to help improve your financial wellness and reduce stress.

Understand what causes financial stress

2. Determine your financial priorities

Start by reflecting on your financial priorities. For students this often includes paying for school or paying off student loans, studying abroad, saving for spring break, building an emergency fund, paying down credit card debt or buying a car. Name the milestones that are most important to you, and plan accordingly.

3. Create a plan and stick to it

While setting actionable goals starts you on the journey to better financial health, it’s essential to craft a plan to follow through. Identifying and committing to a savings plan may give you a greater sense of control over your finances, which may help reduce your stress. Creating and sticking to a budget allows you to better track where your money is going so you may spend less and save more.

4. Pay down debt

Many students have some form of debt and want to make progress toward reducing their debt obligations. One option is the debt avalanche method, which focuses on paying off your debt with the highest interest rate first, then moving on to the debt with the next-highest interest rate. Another is the debt snowball method, which builds momentum by paying off your smallest debt balance, and then working your way up to the largest amounts.

5. Build your financial resilience

Some financial stress may be inevitable, but building financial resilience may allow you to overcome obstacles more easily. The more you learn about managing your money, for instance, the more prepared you’ll feel if the unexpected happens. Growing your emergency savings also may increase resilience since you’ll be more financially prepared to cover unexpected expenses or pay your living expenses.

6. Seek help and support

Many colleges have resources to help students experiencing financial stress, like financial literacy courses or funds that provide some assistance for students in need. Talk to your admissions counselor or advisor about your concerns, and they can direct you to sources of support. Your school’s counseling center can also be a great resource for mental health assistance if you’re struggling with financial stress.

The bottom line

Financial stress can affect college students’ health and wellbeing, but it doesn’t have to derail your dreams. Setting smart financial goals and developing simple plans to achieve them may help ease your stress. Revisit and adjust your plan as needed to ensure it continues to work for you, and seek additional support on campus as needed to help keep you on track.

 JPMorgan Chase Bank, N.A. Member FDIC