Wednesday, July 30, 2008

Blumenthal sues 3 credit raters

The state's attorney general, Richard Blumenthal, Wednesday sued three major credit-rating agencies, charging they gave artificially low ratings to Connecticut cities and towns, costing taxpayers millions of dollars in unneeded bond insurance and causing the municipalities to pay higher interest rates on borrowing than they should have.

The suit names Moody's, Fitch and the parent company of Standard & Poor's.

"All three credit rating agencies systematically and intentionally give lower credit ratings to bonds issued by states, municipalities and other public entities as compared to corporate and other forms of debt with similar or even worse rates of default," Blumenthal said in a news release.

Ed Sweeney, a spokesman for Standard & Poor's, referred a reporter to a statement by McGraw Hill, which owns S&P.

"The lawsuit filed in Connecticut this morning is simply a case of a state attempting to use litigation to dictate what bond rating it receives," the statement said. "The suit is without merit and we will vigorously defend against it."

The attorney general's suit alleges New Haven taxpayers, for example, paid $2.2 million in unnecessary bond insurance premiums to receive a higher rating on nine general-obligations bonds issued from 2003 through 2008 because of lower ratings given by Moody's. The New Haven bonds were given a "A3" rating each time, which Blumenthal said was too low.

"The claims by the attorney general violate First Amendment rights -- which courts around the country have repeatedly ruled apply to rating agencies and their opinions -- and would result in an erosion of analytical independence and undermine investor confidence in the market by allowing ratings to be determined by governmental mandate or the treat of litigation," the McGraw Hill statement said.

The attorney general's statement including examples of a number of municipalities allegedly harmed,  can be viewed:

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I noticed that this blog has gotten more than 6,000 hits since I started counting a while ago. That's about 3 seconds' worth for a site about Britney, but not bad, I must say, for an old newshound howling in the netherlands.

Thanks to those who come back from time to time. You can read other Len'sLens posts besides the ones you were linked to by visiting:

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Karl Rove, the political kingmaker who gave us Bush, Cheney and the Iraq war, has been accused of being in contempt of Congress. Funny, I held him in contempt many, many years ago. I guess it takes a bit of doing for Congress to catch up.

Until next time...

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