US state Ohio sues Moody’s, S&P, Fitch for inflated ratings

[Naveed Yaseen]

NEW YORK: The three largest credit rating agencies were sued on Friday by Ohio, which said their pursuit of profit and ties to Wall Street resulted in inflated ratings on toxic mortgage debt that cost state pension funds hundreds of millions of dollars.

Attorney General Richard Cordray filed the lawsuit against Standard & Poor’s, Moody’s Investors Service and Fitch Ratings on behalf of five pension funds that say they lost more than $457 million because the agencies gave false and misleading, often “triple-A” ratings to securities they knew were risky.

“The credit rating agencies sold out, and they sold us out,” Cordray told reporters. “They traded in their objectivity, and in exchange received massive profits.” S&P is owned by McGraw-Hill Cos, Moody’s by Moody’s Corp and Fitch by France’s Fimalac SA.

Friday’s lawsuit in federal court in Columbus, Ohio, was filed four months after the nation’s largest pension fund, the California Public Employees’ Retirement System, sued the agencies over ratings they said caused $1 billion of losses.

California Attorney General Jerry Brown subpoenaed the agencies in September as he examined whether they violated state law.

Cordray accused the agencies of breaking Ohio law, and said he does not plan to start a class action. The Obama administration, Congress and regulators are weighing financial industry reforms that could tighten ratings oversight and limit perceived conflicts of interest.

http://www.thenews.com.pk/daily_detail.asp?id=209744