The housing boom is officially a bust for Standard & Poor's.
The debt watchdog agreed to pay $1.5 billion to settle allegations that it helped trigger the 2008 financial crisis by knowingly handing out high grades on poor-quality mortgages.
The settlement led by the Department of Justice follows years of wrangling between the credit-ratings giant and the office of outgoing Attorney General Eric Holder.
S&P, part of McGraw Hill Financial, isn't admitting wrongdoing under the deal that resolves a lawsuit brought by 19 state attorneys general and the District of Columbia.
S&P analysts knew the risky mortgages weren't worthy of top-notch ratings and had even written a parody song about the demise of the housing market set to the tune of The Talking Heads' "Burning Down the House," according to the suit.
"After careful consideration, the company determined that entering into the settlement agreement is in the best interests of the company and its shareholders and is pleased to resolve these matters," S&P said in a statement.
S&P and Uncle Sam have been bickering since at least 2010, when the ratings agency cut the country's debt by one notch — a move that sent stock markets reeling.
When the government sued the company three years later, S&P accused the feds of retaliation for the debt downgrade.
In the settlement agreement, which is subject to court approval, S&P now says there was no basis for that accusation.
The deal is structured so that $1.37 million is split between the US government and the states and DC. S&P will also pay $125 million in a separate settlement with the California Public Employees' Retirement System over soured securities.
The deal comes a week after S&P agreed to a one-year ban on a segment of the commercial mortgage-backed securities market because of misleading ratings.
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