Connecticut will collect $36 million of a billion-dollar, federal and multi-state settlement with Standard & Poor’s Financial Services LLC stemming from the Wall Street rating firm’s questionable ratings of risky securities tied to subprime mortgages in the run-up to the 2008 financial crisis, authorities say.
State Attorney General George Jepsen announced Tuesday the settlement between S&P and Connecticut – which was the first state to sue S&P in 2010 – the U.S. Justice Department and 17 other states.
The settlement requires S&P to pay $1.375 billion, divided equally between states and the Department of Justice.
Jepsen said Connecticut’s share will go into the General Fund.
Structured finance securities backed by subprime mortgages were at the center of the 2008 financial crisis. These financial products, including residential mortgage-backed securities and collateralized debt obligations, derive their value from the monthly payments consumers make on their mortgages.
“Today’s settlement is the product of years of hard-fought litigation and reflects the strength of the cases developed by our coalition of states with the Department of Justice,” Jepsen said in a statement. “We alleged that S&P’s ratings of structured finance securities, including risky mortgage-backed securities, were directly influenced by the demands of the powerful investment banking clients who issued the securities and paid S&P to rate them. In effect, S&P considered its own business interests, contrary to its public statements that its ratings were objective.”
