Sep 17, 2009

Credit Rating Firms to be investigated by California


he securities were given the highest ratings by the companies; some of them backed by subprime mortgages, making them "appear as safe as government issued Treasury bonds." The announcement regarding the investigation will be made by Brown today in San Francisco.

The statement by Brown said: "In rating these securities, these agencies worked behind the scenes with the same Wall Street firms that created them. For their work, the agencies earned billions of dollars in revenue, at a rate double what they earned for rating other financial products."

Brown did not name the companies to be investigated.

The recent development has appeared after a federal judge passed a ruling that rejected arguments by Moody's Investors Service Inc. and Standard & Poor's, which was that investors can't sue over deceptive ratings of private-placement notes because those opinions are protected by free-speech rights.

Under the ruling, those companies, which are in the class-action lawsuit filed in New York by investors alleging the raters hid the risks of securities linked to subprime mortgages, are compelled to respond to fraud charges.



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