las agencias de rating a juicio en eeuu por sus dudosas calificaciones que provocarón la crisis...

8/14/2019 Las Agencias de Rating a juicio en EEUU por sus dudosas calificaciones que provocarn la crisis econmica

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Connecticut Attorney General's Office

Press Release

Attorney General Sues Credit Agencies For Tainted Ratings That Enabled FinancialMeltdown

March 10, 2010

Attorney General Richard Blumenthal today sued two of the nations largest c redit ratingagencies -- Moodys and Standard & Poors -- for knowingly ass igning tainted credit ratings to risk yinvestments backed by sub-prime loans.

Blumenthal said Moodys and S&Ps alleged misc onduct enabled the worst economicdownturn in the nation since The Great Depression.

The l awsuits, unique and unlike others f iled on behalf of specif ic inves tors or pension funds,are sovereign enforcement actions brought under the Connecticut Unfair Trade Practices Act.

Despite repeated statements emphasizing their independence and objectivity when ratingstructured finance securities, Moodys and S&P knowingly failed to live up to their representations.In particular, their ratings on st ructured finance securities were tainted by their desire to earnlucrative fees.

Moodys and S&P knowingly catered to the demands of investment banks and other largeissuers of st ructured finance securities in order to increase their own revenues. As a result, manystructured finance securities that contained a great deal of credit risk undeservedly received
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Office of the

Attorney General55 Elm Street

Hartford, C onnec ticut06106

Telephone:

(860) 808-5318

Moodys and S&Ps highest ratings, Blumenthal alleges.

These credit rating agencies gave the best ratings money could buy -- catering to theirpowerful investment bank clients, rather than objectively rating risky bonds, Blumenthal said.Countless investors and others -- including individuals, banks, mutual funds, insurance companies,hedge funds and pension funds -- were misled into believing that these credit ratings wereindependent and objective, and lost money on investments they might have avoided if told the truth.

Moodys and S&P violated public trust -- resulting in many investors purchasing securitiesthat contained far more risk than anticipated and that have ultimately proven to be nearly worthless.

The results have been catastrophic -- crippling the entire economy. Todays lawsuit seeksan order stopping Moodys and S&P from deceiving consumers, as well as civil penalties anddisgorgement of il l-gotten profits.

Structured finance securities have been the centerpiece of the national financial crisis. Theyare financial products whose value is derived from a s tream of revenue flowing from a pool ofunderlying assets -- assets most commonly backed by residential mortgages, including subprimemortgages. They can also be backed by other assets such as student loans and credit cardbalances.

Moodys and S&P dominate the ratings market for structured finance securities -- and areresponsible for rating virtually all structured finance securities issued into the global capital markets.

Investors and other market participants rely on Moodys and S&P to fulfill their statedpromise of independence and objectivi ty.

In Moodys own Best Practices Handbook, the company claims: We serve investors byproviding them with timely credit research and independent, thoughtful, and accurate rating opinionson which they can base their investment decisions.
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Both Moodys and S&P have secretly defied their public promises and legal duty to provideindependent and objective ratings, Blumenthal said.

This was not always the case. At one time, Moodys and S&P refused payments from -- oreven to meet with -- issuers of a security it rated. The companies business models haveincreasingly shifted, however, so that a vast majority of their fees are now paid by issuers.

As one of Moodys former vice presidents publicly noted, Starting in 2000 there was asystematic and aggressive strategy to replace a culture that was very conservative, an accuracyand quality oriented culture, a getting the rating right kind of culture, with a culture that wassupposed to be business friendly but was consistently less likely to assign a rating that was tougherthan our competitors.

Blumenthal said Moodys and S&Ps lack of independence and objectivity, violating theConnecticut Unfair Trade Practices Act, has manifested itself in several ways, including:

Moodys and S&P modified rating methodologies to make more money: In short, in directcontrast to their public representations, and unbeknownst to inves tors and other marketparticipants, Moodys and S&Ps rating methodologies were directly influenced by a desire toplease their clients and enhance their own revenue. Assessing actual credit risk was ofsecondary importance to revenue goals and winning new business.

Ratings shopping: Issuers unhappy with a credit rating agencys initial analysis can attemptto influence the process by informing the rating agency of a more desirable rating that one of

its competitors is willing to assign. As a result, the rating agency knows that it must meet itscompetitors rating or forgo the revenue altogether. Both Moodys and S&P knuckled under tothis pressure and allowed it to influence the ratings they assigned to structured financesecurities.

Despite public representations of vigilant monitoring of conflicts of interest inherent to theIssuer Pays business model, Moodys marginalized its own compliance departments andeven punished employees who raised concerns about its lack of independence and


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objectivity. In some cases, compliance employees were given poor performance evaluations,less compensation and even demoted for interfering with Moodys ability to please the largeissuers of structured finance securities that paid the majority of Moodys fees.

Todays action is distinct from Blumenthals ongoing litigation against all three credit ratingagencies -- Moodys, S&P and Fitch -- that was filed in July 2008.

The earlier lawsuits allege that the agencies knowingly gave st ate, municipal and otherpublic entities lower credit ratings as compared to other forms of debt with s imilar or even worserates of default. Those cases remain pending.

Blumenthal thanked members of his office who worked on the investigation AssistantAttorneys General Matthew Budzik, George OConnell and Laura Martella, and Paralegal HollyMacDonald, under the direction of As sistant Attorney General Michael Cole, Chief of the At torneyGenerals Antitrust Department.

View Standard & Poor's Complaint - (PDF-8MB)View Moody's Complaint - (PDF-3MB)

Content Last Modified on 3/10/201 0 3:30:59 PM

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