Calpers Sues Agencies Over Ratings of Securities

[swag]

Source: New York Times

The nation’s largest public pension fund has filed suit in California state court in connection with $1 billion in losses that it says were caused by “wildly inaccurate” credit ratings from the three leading ratings agencies, The New York Times’s Leslie Wayne reported.

The suit from the California Public Employees Retirement System, or Calpers, a public fund known for its shareholder activism, is the latest sign of renewed scrutiny over the role that credit ratings agencies played in providing positive reports about risky securities issued during the subprime boom that have lost nearly all of their value.

The lawsuit, filed late last week in California Superior Court in San Francisco, is focused on a form of debt called structured investment vehicles, highly complex packages of securities made up of a variety of assets, including subprime mortgages. Calpers bought $1.3 billion of them in 2006; they collapsed in 2007 and 2008.

Calpers maintains that in giving these packages of securities the agencies’ highest credit rating, the three top ratings agencies — Moody’s Investors Service, Standard & Poor’s and Fitch — “made negligent misrepresentation” to the pension fund, which provides retirement benefits to 1.6 million public employees in California.



Read more: http://dealbook.blogs.nytimes.com/2009/07/15/calpers-sues-agencies-over-ratings-of-securities/

[aquart]

1. Good.

[Grinchie]

2. I remember a warning to watch CALPERS numbers in 2008.

They were supposed to release their annual balance sheet in June or July, so I went to take a look.

It was deleayed, and as time passed, I forgot all about taking a look at the numbers, as the Economy was obviously screwed at that point with Oil at 150.00, and all the restaurants becoming vistims of the Commodity inflation that followed.

Now, a year later, we see the debris left by the crash on the Retirement Funds for the state of California, in the form od a Lawsuit against the Rating Agencies. That's all fine and good, but I hope that the shady practice of using two different scales to rate Junk vs Municipal Bonds is brought under the Microscope, as it is widely know that Cities and Municipalities were consistently given Lower ratings, which forced them into using "Protection" from the monolines.

Not to mention the (Auction Rate Securities) ARS system that utterly collapsed when entities such as Goldman Sach decided to not pick up the slack if there were no buyers.

[depakid]

3. Executives and employees at the ratings agencies ought to be prosecuted

and not just a few figureheads.

[damntexdem]

4. Good -- very important to many, many retirees.

I watch each month to see whether my CALPERS and UCRS payments have made it to my bank.

[bemildred]

5. Rating agencies are all private profit-making enterprises, and tools of the financial "elites".

They need to be replaced with non-profit public-spirited sharply-regulated enterprises that think accounting is more than a game.

[Psephos]

7. You want invisible mid-level bureaucrats who face no consequences for the decisions doing this?

You want to rely on the same middle-of-the-percentiles talent pool that feeds the rest of government bureaucracies?

What exactly would make these people think the whole thing was more than a game? They'll get their paychecks and bennies no matter what they do...their union will see to that. So for them, the name of the game is 25 and out.

Calpers has the option of suing private companies should there be a finding of tortious damage, such as breach of duty or breach of contract. A government agency would be immune from being sued.

So, you would replace the current system where the courts can be used as a corrective with one where the courts could no longer be used.

The idea of public-spirited career bureaucrats, brimming with fervor and altruism, did bring me a moment of levity, however, and I must thank you for that. ;)

[Bozita]

6. Wonderin' whether those ratings agencies have insurance