Thursday, December 04, 2008

Rating Agencies Sued for Good Ratings

Fitch and Moody's are being sued because they rated mortgage-backed-securities (MBS) too highly.

You might expect that--if the people bringing the suit were the people who hold the (worthless) bonds.

But they aren't the ones who are doin' the suin'...

In what appears to be the first legal action of its kind, an association of community-based organizations has filed a federal civil rights complaint against two of the three largest Wall Street ratings agencies, charging that their inflated ratings on subprime mortgage bonds disproportionately caused financial harm to African American and Latino home buyers.

The complaint, filed by the
National Community Reinvestment Coalition, alleges that Moody's Investors Service and Fitch Ratings enriched themselves by assigning high ratings to bonds backed by mortgages "that were designed to fail" because of "unfair payment terms and insufficient borrower income levels."

The agencies "knew or should have known" that subprime loans disproportionately were marketed to minority consumers -- a process known as "reverse redlining" -- and that those borrowers would ultimately default and go into foreclosure at high rates, according to the complaint.


Oh, what a tangled web we weave.....
...when Gummint BS we believe....

3 comments:

Shoebox said...

I've been surprised that there hasn't been a class action on those knuckleheads...AAA my butt! I guess all things are possible but I can't see how these groups even have standing to sue.

Disgruntled Car Salesman said...

"...an association of community-based organizations..."

So this is what Obamammammaammammama did before becoming a politician. Now I'm really excited.

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