Connecticut Sues Moody's, S&P and Fitch Over Ratings (Update4)
By Karen Freifeld
July 30 (Bloomberg) -- Connecticut Attorney General Richard Blumenthal sued Moody's Corp., Fitch Inc. and Standard & Poor's parent The McGraw Hill Cos. claiming they unfairly gave municipal bonds lower ratings than comparable corporate or structured debt.
``We are holding the credit-rating agencies accountable for a secret Wall Street tax on Main Street,'' Blumenthal said in a statement.
Blumenthal said the dual rating system costs ``taxpayers literally $2.3 billion for insurance.'' He has been conducting an antitrust probe of the three companies since last summer. In June, he said firms that rate U.S. municipal bonds ``knowingly and systematically'' gave the securities lower grades, raising costs for state and local governments.
Moody's, under pressure from regulators and state finance officials, said last month it would change the way it rates municipal bonds and rank them on the same scale it uses for corporate and sovereign debt. Blumenthal said the dual standard benefited bond insurers, investors and the agencies themselves.
Wednesday, July 30, 2008
WALL STREET VERSUS MAIN STREET
The Masters of the Universe love to play the rubes for suckers. They'll sell them auction-rate bonds with the assurance that they are as good as cash and then when they can no longer support the market, refuse to let the owners sell the bonds. Today we learn that the ratings agencies may have deliberately lowered the ratings on municipal bonds to force municipalities to buy default insurance.
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