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AG Cooper announces $21.5M settlement over mortgage lending crisis

Posted February 3, 2015

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— The North Carolina Attorney General's Office announced a $21.5 million settlement Tuesday with Standard & Poor's Financial Services.

The money is part of S&P's total $1.38 billion settlement with the U.S. government, 19 states and the District of Columbia for knowingly inflating its ratings of risky mortgage investments that helped trigger the financial crisis.

Under the agreement, S&P admits that it allowed "the pursuit of profits to bias its ratings," the Justice Department said.

“Good ratings led investors to make bad bets on risky securities, contributing to job losses and foreclosures that hit taxpayers and businesses in North Carolina hard,” said N.C. Attorney General Roy Cooper. "This settlement is a step toward righting the wrong and preventing future harm."

North Carolina’s share of the S&P settlement will benefit North Carolina schools, with more than $2.1 million in fines going to the state Civil Penalty and Forfeiture Fund. Cooper said he would like the remaining money – about $19.45 million – to be invested in two areas.

He recommends using $15 million to save the North Carolina Teaching Fellows program, which gives college scholarships to high achieving education students who stay to teach in North Carolina schools. He wants the remaining $4.4 million to be used to retain scientists at the State Crime Lab and to provide the lab with more equipment.

Lawmakers will have the final say over how the money will be spent, but Senate majority leader Sen. Harry Brown, R-Onslow, said Cooper's recommendations will be considered.

"We'll look at what he has and talk about it and see where it leads," Brown said.

Gov. Pat McCrory released a statement Tuesday, saying he is "very pleased with the settlement."

“This good news allows us to incorporate an additional $21.5 million in our $20 billion budget recommendations as we focus our investments in jobs, education, public safety, public health and transportation," he said. "We also welcome the new attention toward a decade-old problem in our state crime labs. I appreciate the work of the Attorney General and his staff on this settlement.”

At a news conference Tuesday, U.S. Attorney General Eric Holder said S&P's leadership "ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised."

Company executives "complained that the company declined to downgrade underperforming assets because it was worried that doing so would hurt the company's business," Holder added. "While this strategy may have helped S&P avoid disappointing its clients, it did major harm to the larger economy, contributing to the worst financial crisis since the Great Depression."

89 Comments

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  • Stan Simmerson Feb 4, 2015
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    View quoted thread


    Agreed, but I'll go you one better: NO President or Congress should be able to send troops to another country without the Congress passing a tax to pay for the mission. Bush, and now Obama, have spent trillions of dollars on undeclared wars. If the politicians want to send our troops into battle so quickly, (and they do!) then let them grow a backbone and stand up and vote for it and FUND IT. I would hazzard a guess that we'd be in a lot less military quagmires from that point on.

  • Atheistinafoxhole Feb 3, 2015

    "I disagree its about the mechanism for funding elections. Thats only how you get your message out."

    Then why the constant fundraising? What DO they need money for if not the campaign.

    If we had publicly financed campaigns, everyone would get the same amount of messaging (for a much lower cost). If their message is superior, it should win out.

    It should not be about who is able to spend the most money to shout the loudest - drowning out the other messages.

  • blarg Feb 3, 2015

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    I disagree its about the mechanism for funding elections. Thats only how you get your message out.

    Clearly politicians can advocate all sorts of unsound policies, spend the taxpayers money and comfortably retire long before any chickens come home to roost.

    They get the immediate benefit of claiming credit for being in favor of children, education, the elderly, "providing a pathway to home ownership", "bending the cost curve of health care downward" or whatever ridiculous nostrum they think will continue their hold on power.

    But when the smoke clears and the taxpayer realizes that they are on the hook for all of the cost but none of promised benefits, the politico is long gone.

    All benefit, no cost. Thats why we are self selecting a political class who lies and over promises.

    We need to apply the same negative re-enforcement in this article to politicians.

  • Atheistinafoxhole Feb 3, 2015

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    "Community Reinvestment Act changes starting in 1992?"

    I'm not sure what you are getting at here, the 1st bank bailouts were in 1991. The second half of the Clinton term is widely held to be the most prosperous since the late 60's (when marginal tax rates were as high as 90%, btw.).

  • Atheistinafoxhole Feb 3, 2015

    We should build dorms for lawmakers, all of them and require them to live there while in session. They get meals in the cafeteria and a transit pass - this would allow us to lower their wages.

    Any time our troops are deployed in harm's way, they would be required to remain in session until the troops are no longer under threat.

    There is more, but we must start somewhere.

  • Atheistinafoxhole Feb 3, 2015

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    "But why is that same policy conspicuously absent from politicians? Why can they advocate teh worst policies but suffer no repercussions."

    This is due to our privately financed election system. I agree with you about politicians. The problem is that in order to change the system, we need THEM to pass the laws that would change it, Won't happen with the "fox guarding the hen house."

    I do have some ideas, though. We have to convince all voters to change their registration to "unaffiliated" or the equivalent in their state - this would force politicians to campaign to a wider electorate.

    The most comprehensive changes would require Constitutional Amendments, that will be tough.

  • blarg Feb 3, 2015

    History is full of lessons that we seem to keep forgetting. Don't forget that for the better part of a century, there were no large financial institution failures and subsequent bailouts - why is that?
    Community Reinvestment Act changes starting in 1992?

    Hey lets find some common ground!

    This article is about correctly assessing liability to S&P so as to influence their future actions to correctly price the result of improper behavior.

    And the fact that Lehman Brothers was allowed to go bankrupt was a least a shot across the bow.

    But why is that same policy conspicuously absent from politicians? Why can they advocate teh worst policies but suffer no repercussions.

    Chris Dodd- receiver of sweet heart loans from a group he regulated faced no consequences. Maxine Waters who pressured GSE to disastrously loosen credit standards is still in Congress. Barny Frank blocked GSE regulation and is now a well paid lobbiest.

    Politicians can botch everything and face no consequenc

  • Atheistinafoxhole Feb 3, 2015

    View quoted thread


    Now you are simply parroting the "supply side" talking points.

    Are you saying that Teddy Roosevelt should not have broken up large trusts?

    He was the LAST real Republican President.

    Again, the reason we have passed certain restrictions on business is that we have seen the ill effects of "self regulation" before - and likely will again.

  • Atheistinafoxhole Feb 3, 2015

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    Exactly! As you point out, it not the act of guaranteeing mortgages that is the problem.

    You are overlooking some important pieces. The mortgage crisis of 2008 revolved largely around Adjustable Rate Mortgages, which led to the failures.

    In 1980, Carter passed the DIDMCA, which began chipping away at Glass Steagall. In 1982 Ronald Reagan passed the Garn-St. Germain, which allowed S&L banks to offer adjustable rate mortgages (they wanted to take advantage of the high interest rates at the time) and invest more in consumer and commercial real estate.

    Sound familiar?

    History is full of lessons that we seem to keep forgetting. Don't forget that for the better part of a century, there were no large financial institution failures and subsequent bailouts - why is that?

  • blarg Feb 3, 2015

    What GLB DID was allow the financial institutions to become "too big to fail."If you are going to blame every factor that allows businesses to grow, you might as well start with the road system and the police force.

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