Legal News

Connecticut Latest to Go After Rating Agencies

By Ashby Jones

The Nutmeg state delivered another dose of bad news today to the besieged ratings agencies — Moody’s, Fitch and Standard & Poor’s — when Connecticut Attorney General Richard Blumenthal slapped the trio with lawsuits. The allegation: that they systematically and intentionally gave lower ratings to states, municipalities and other public entities. Click here for the WSJ story, here for Bloomberg’s account and here for the press release from Blumenthal’s office. (The three separate complaints, all filed in state court in Hartford, can be accessed through the AG’s Web site.)

As a result of the unfairly low ratings, Blumenthal claims, Connecticut’s cities, towns, school districts, and sewer and water districts have been forced to spend millions of taxpayer dollars to purchase bond insurance to improve their credit rating, or pay higher interest costs on their lower rated bonds.

“We are holding the credit rating agencies accountable for a secret Wall Street tax on Main Street — millions of dollars illegally exacted from Connecticut taxpayers,” Blumenthal said.

Neither the WSJ nor Bloomberg included comment from any of the agencies.

It’s not the first legal scrape for the ratings agencies this year. Last month, New York AG Andrew Cuomo reached a settlement with the trio which changed the way the agencies get compensated, in order to avoid perceived conflicts of interest.

LB Reading Recommendation of the Day: Slate’s David Plotz wrote a nice piece back in 2000 about Richard Blumenthal. If pressed for time, skip right to the section on Blumenthal’s resume, which just might give Ben Heineman’s a run for its money.

Photo: Wikimedia Commons

Full post as published by Law Blog - WSJ.com on July 30, 2008 (boomark / email).