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NY attorney general looks at ratings agencies
ALBANY, New York—New York Attorney General Eric Schneiderman has begun examining America’s biggest credit rating agencies’ compliance with agreements reached by his predecessor, Gov Andrew Cuomo, that ended an investigation into mortgage-backed securities. The mid-2008 agreements, imposing no financial penalties, required Moody’s Investors Service, Standard & Poor’s and Fitch Inc to publicly disclose due diligence and evaluation criteria.
They also required partial upfront payments to prevent banks from simply buying the better ratings for those securities. With that market already collapsed, the agencies say they weren’t rating new mortgage-backed securities. The 42-month agreements have expired. An official with knowledge of the investigation, who was not authorised to speak publicly, said a subpoena this week went to S&P and information requests to Moody’s and Fitch.
Under the agreement, then-Attorney General Cuomo agreed to “terminate all current investigation” and “not institute any action” against the agencies. They admitted no wrongdoing but agreed to cooperate with the attorney general’s ongoing probe into the mortgage industry and adopt reforms.
The official noted there appeared to be little effort to monitor compliance and they are looking into whether violations would enable the office now to take another look at alleged misconduct in securities ratings that contributed to the collapse of financial markets. S&P spokesman Edward Sweeney declined to comment yesterday. (AP)