Calpers Sues Agencies Over Ratings of Securities
The California Public Employees Retirment System is the nation’s largest public pension fund and has filed suit against rating agencies; Moody’s Investors Service, Standard & Poor’s and Fitch. Calpers states the agencies ratings were “wildly innaccurate”.
In short the agencies, allegedly, gave bulk packages of sub prime loans higher ratings in order to win the bidding war against other rating agencies. Investors, like Calpers in this case, buy the bulk loans based on the ratings. Calpers is now seeking damages as those packaged loans are falling apart, and unveiling that the loans should not have been rated so high in the first place.
If this is true and rating agencies did inflate sub prime ratings to get a deal done, then they will be blamed for the current state of the housing industry. With out their good ratings, these bulk loan packages would not have been such a hot item for investors to buy, and the loans would not have been pushed so hard to sell on the street.
Do you believe any one entity is to blame for the mortgage meltdown, or a combination of? Comment below!
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Concord, CA Contra Costa County
