Why Standard & Poor's would rate investments 'structured by cows'

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Why Standard & Poor's would rate investments 'structured by cows'

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Ratings agency Standard & Poor’s is to pay out $1.5 billion (1.3 billion euros) to resolve a series of government lawsuits over the sub-prime scandal.

S&P was alleged to have rated mortgage securities too highly in the run up to the 2008 financial crisis.

The US Department of Justice and state and local governments said it had given the overly rosy ratings in order to win more business from the investment banks that issued the securities.

The settlement comes after more than two years of litigation, but as usual with such deals does not admit to any violations of law.

The US Attorney General revealed S&P had ignored warnings from its own analysts about the quality of the investments.

“On more than one occasion, the company’s leadership ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised,” said Eric Holder.

The announcement came one day after the firm reached a separate $125 million (1.09 million euro) settlement with public pension fund California Public Employees’ Retirement System.

It had sued S&P in 2009, claiming the agency’s inaccurate ratings caused the firm hundreds of millions of dollars in losses.

The United States sued S&P in 2013 after initial settlement talks broke down seeking $5 billion (4.36 billion euros) in one of the most ambitious cases the Justice Department has fought tied to the financial crisis.

It accused the ratings agency of defrauding investors and among its evidence was an excerpt from an instant-messaging exchange between two S&P analysts that read: “It could be structured by cows and we would rate it.”