Tags: US | Ratings | Agencies | Lawsuit

Connecticut Sues Moody's, S&P Over Debt Ratings

Wednesday, 10 Mar 2010 01:56 PM

 

  Comment  |
   Contact  |
  Print   |
    A   A  
  Copy Shortlink

Connecticut's attorney general sued Moody's Investors Service and Standard & Poor's over ratings the pair issued on risky investments.

In the civil lawsuit filed Wednesday, Attorney General Richard Blumenthal alleged Moody's and S&P knowingly assigned false ratings to complex investments that pushed the country into recession.

The suit, which Blumenthal called the first of its kind against ratings agencies, is being brought under Connecticut's unfair trade practices law. The attorney general is seeking penalties and fines that could reach into the hundreds of millions of dollars, he said.

"Moody's and S&P violated public trust — resulting in many investors purchasing securities that contained far more risk than anticipated and that have ultimately proven to be nearly worthless," Blumenthal said.

The securities in question are complex bonds backed by pools of mortgages. Most of the mortgages were subprime loans given to customers with shaky credit history. Those investments have lost much of their value in recent years as mortgage defaults skyrocketed.

The attorney general called the ratings process "deceptive and misleading" during a news conference. He said lucrative fees Moody's and S&P received for rating the investments affected their objectivity in rating the debt. Companies issuing the investments paid Moody's and S&P to rate it.

Many of the investments were given top "AAA" ratings during the peak of the housing market between 2005 and 2007. Then the market turned. Defaults mounted, home prices plummeted and the investments lost much of their value.

Most of the ratings have since been cut severely by Moody's and S&P.

Steven Weiss, a spokesman for S&P's parent McGraw-Hill Cos., said, "We believe the claim has no legal or factual merit and we intend to vigorously defend ourselves against it."

A spokesman from Moody's was not immediately available to comment.

Some pension funds have already sued Moody's and S&P as well as Fitch Ratings over their role in rating risky investments that collapsed during the recession and credit crisis.

Wednesday's lawsuit comes on top of past civil charges Blumenthal made against the ratings agencies claiming they created dual standards for rating government and corporate debt. In July 2008, Blumenthal accused Moody's, S&P and Fitch Ratings of giving cities and towns artificially low credit ratings that ultimately cost taxpayers millions of dollars in unnecessary insurance and higher interest payments.

That suit is still pending.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

  Comment  |
   Contact  |
  Print   |
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Christianity Under Fire Here at home

Tuesday, 16 Dec 2014 10:16 AM

Thought police act first, then investigate later.
 . . .

'Architect' Gruber's Admission Warrants Repeal

Friday, 12 Dec 2014 09:26 AM

Instead of using this space to pretend the newly released CIA "torture" report confirms that the United States is the mo . . .

Rule the Nation Conservatively

Tuesday, 09 Dec 2014 10:01 AM

I am concerned that certain Republicans just can't take yes for an answer. To borrow an old adage, they can't handle pro . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved