Credit Rating Industry Dodges Reforms, Despite Role in Financial Meltdown

[marmar]

Credit Rating Industry Dodges Reforms, Despite Role in Financial Meltdown

Saturday, 21 June 2014 12:54
By Alison Fitzgerald, Center for Public Integrity | Report


The California Public Employee Retirement System requires that bonds it holds be rated by one of the top three credit raters even after it sued those companies for issuing "untrue, inaccurate and unjustifiably high credit ratings."

"These credit ratings were false at the time they were initially assigned, and continued to be false during the existence of the" investments, Calpers, the nation's biggest pension fund, claims in its 2009 lawsuit against Moody's Corp., Fitch Inc. and the parent company of Standard and Poor's. The state pension fund says the bad ratings cost it as much as $1 billion.

That Calpers still depends on S&P, Moody's and Fitch to rate its investments shows how much power these companies continue to wield in the global financial industry even after several investigations concluded their AAA ratings on mortgage bonds and other complex investments helped lead directly to the 2008 financial collapse. Calpers settled with Fitch without receiving payment, and the suit against S&P and Moody's is pending.

Calpers, which manages $288 billion in assets, isn't alone. Most major pension funds, insurance companies and mutual funds require investments in corporate bonds, mortgage bonds or collateralized debt obligations be rated by one of the three major ratings agencies. ...............(more)

The complete piece is at: http://truth-out.org/news/item/24514-credit-rating-industry-dodges-reforms-despite-role-in-financial-meltdown