Blog on the Run: Reloaded

Sunday, November 22, 2009 10:10 am

His judgment cometh, and that right early not a damn second too soon


We wouldn’t be in the situation we’re in now without the credit-rating agencies — Standard & Poor’s, Moody’s and Fitch. And people are beginning to figure that out:

Already facing a spate of private lawsuits, the legal troubles of the country’s largest credit rating agencies deepened on Friday when the attorney general of Ohio sued Moody’s Investors Service, Standard & Poor’s and Fitch, claiming that they had cost state retirement and pension funds some $457 million by approving high-risk Wall Street securities that went bust in the financial collapse.

The case could test whether the agencies’ ratings are constitutionally protected as a form of free speech.

The lawsuit asserts that Moody’s, Standard & Poor’s and Fitch were in league with the banks and other issuers, helping to create an assortment of exotic financial instruments that led to a disastrous bubble in the housing market.

“We believe that the credit rating agencies, in exchange for fees, departed from their objective, neutral role as arbiters,” the attorney general, Richard Cordray, said at a news conference. “At minimum, they were aiding and abetting misconduct by issuers.”

He accused the companies of selling their integrity to the highest bidder.

Remember, we’re dealing with a setup in which companies pay the ratings agencies to rate their stuff. No conflict of interest there.

And I’d like to think that this will be a slam dunk for the plaintiffs. But the system is so rigged that I suspect it won’t. Hell, if a TV station can’t be held liable for broadcasting false news, what makes you think a bankster is going to have to pay a dime for screwing people?

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