Corporate Governance

Credit Agencies Illegally Gave Municipalities Low Ratings

By Fei-Lu Qian

Connecticut?s Attorney General, Richard Blumenthal sued the three major credit rating agencies for violating Connecticut?s Unfair Trade Practices Act by intentionally giving low credit ratings to bonds issued by Connecticut?s municipalities and other public entities. This action is the result of an ongoing investigation by the AG into possible antitrust violations, consumer protection and other violations by the credit rating agencies.

Specifically, the AG charges that Moody?s, Standard & Poor and Fitch Ratings ?systematically and intentionally gave 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.? As a result of the rating agencies? illegal and deceptive practices, many municipalities and school districts in Connecticut were 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.?

Full post as published by PomTalk on July 30, 2008 (boomark / email).