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Subprime Smackdown: State Street Agrees to $313 Million Settlement

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  • Subprime Smackdown: State Street Agrees to $313 Million Settlement



    As everyone by know knows all too well, the once white-hot residential real-estate market crashed-and-burned in 2007 and 2008.

    But for the most part, plaintiffs and regulators have been hard pressed to pin legal liability for the meltdown on just about anyone. Sure, there have some settlements. And some lawsuits pend. but nobody’s really been smacked hard, made to cough up big money over fraudulent or misleading advice.

    Until now. On Thursday, money manager State Street agreed to pay back $313 million to investors misled about their exposure to subprime mortgages—one of the strongest sanctions yet for behavior during last decade’s credit boom. Click here for the WSJ story.

    The deal will put to bed charges filed by the SEC, which alleged the firm told investors the assets were “diversified” when they were actually concentrated in money-losing subprime loans.

    “We believe this settlement is in the best interests of our clients and our business,” said Hannah Grove, a State Street spokeswoman. The firm said it has replaced managers involved in the subprime case.

    So what to make of this? Is this it? The one domino to fall in the entire subprime mess? Not if the SEC can help it. In a statement, the commission’s enforcement chief Robert Khuzami said that potential violations arising from the credit crisis remain a “high priority.”

    Photo: Bloomberg





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