Ratings firm to pay Mass. $12M over subprime crisis
Massachusetts State House
The credit analysis agency Moody's entered into a nearly $864 million settlement agreement with 22 states, including Massachusetts, to resolve charges it acted deceptively when rating securities tied to subprime mortgages.
Attorney General Maura Healey announced Tuesday that Moody's will pay $12 million to Massachusetts in connection with its conduct while rating securities packaged as mortgage loans. The larger settlement was announce on Friday by the U.S. Department of Justice.
While Moody's emphasized its independence and objectivity, Healey's office said, it "allowed its analysis to be influenced by its desire to earn lucrative fees from its investment bank clients and assigned credit rating to risky assets packaged and sold by Wall Street investment banks that failed to disclose the risks posed by those securities."
The company "knew or should have known that its ratings models and methods were inappropriate," according to Healey's office, and the company has agreed to restrictions on how it compensates employees, oversight enhancements and analyst training. Most of the alleged misconduct occurred between 2004 and 2007.
In a statement on Friday, Moody's said, "After careful consideration, Moody’s determined that the agreement, which removes significant legacy legal risk and avoids costs and uncertainty associated with continued investigations and litigations, is in the best interest of the company and its shareholders. Moody’s stands behind the integrity of its ratings, methodologies and processes, and the settlement contains no finding of any violation of law, nor any admission of liability."
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