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Conn. AG sues major bond-rating firms

July 30, 2008 at 3:06 PM   |   Comments

HARTFORD, Conn., July 30 (UPI) -- Connecticut Attorney General Richard Blumenthal Wednesday sued three bond-rating firms for allegedly costing taxpayers millions of dollars.

The Democratic attorney general sued Moody's Investors Service, Standard & Poor's and Fitch Ratings, Legal Newsline reported.

Blumenthal claimed the rating agencies engaged in "deceptive and unfair practices" that cost taxpayers extra interest and insurance costs for municipal bonds. "We are holding the credit-rating agencies accountable for a secret Wall Street tax on Main Street," Blumenthal said.

He added that because the credit-rating firms "knowingly and systematically" gave the securities lower grades than comparable corporate and structured debt, costs were unfairly increased for state and local governments, including school districts and sewer and water districts.

"This rating charade created a Wall Street shell game constructed by the ratings agencies for the benefit of the bond insurers," he said.

The credit- and bond-rating companies said in statements they dispute Blumenthal's claims, Legal Newsline reported.

Moody's Chief Executive Officer Raymond McDaniel called the lawsuit without merit. "The suit implies that the measuring system is wrong," McDaniel said. "That's like saying it's wrong to measure distance in centimeters and right to measure it in inches."

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