Courthouse News Service reports that in the latest
action, filed in U.S. District Court for the Eastern
District of New York, the Public Employees’ Retirement
System of Mississippi has charged Moody’s Investor’s
Service, Fitch Ratings and Standard & Poor’s with
assigning “defective” ratings on mortgage pools that relied
on “inadequate and antiquated” rating models that
considered historical data that was outdated when more
modern methods were available. The class claims that
Moody’s, the Fitch Group, and McGraw-Hill Cos., owner of
Standard & Poor’s, cost investors billions of dollars
by failing to investigate the trustworthiness of statements
issued by J.P. Morgan Acceptance Corp.
The pension plan says the rating agencies at best
neglected their fiduciary responsibilities by not
accurately rating pre-structured mortgage-backed
securities, but instead starting with the rating that was
requested by the certificate issuer, and building a deal
around it, according to the news report.
The three agencies face similar charges in a lawsuit brought earlier this month by the California Public Employees Retirement System (see CalPERS Says Losses Caused by Inaccurate Credit Ratings ).
In testimony before a U.S. House committee, a third public pension system, the Colorado Public Employees’ Retirement Association, asked Congress to increase rating agencies’ accountability (see CO PERA Wants Increased Oversight of Rating Agencies ).
In a request for comment on proposed rules for money market funds, the Securities and Exchange Commission also asked the public to comment on the role of credit rating agencies in money market fund regulation (see SEC Proposes Money Market Funds Improvements ).
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