State Of Tennessee Sues Standard And Poor’s

Tuesday, February 5, 2013

Attorney General Bob Cooper on Tuesday joined the Department of Justice and other state Attorneys General in filing enforcement actions against Standard and Poor’s and its parent company, McGraw-Hill, seeking accountability for alleged misconduct by the credit rating agency.  The allegations involved structured finance securities backed by subprime mortgages that were at the heart of the nation’s financial crisis.

The federal and state complaints allege that despite S&P’s repeated statements emphasizing its independence and objectivity, S&P allowed its credit rating analysis to be influenced by its desire to earn lucrative fees from its investment bank clients.  Investors and others in the marketplace relied on credit rating agencies like S&P for accurate ratings because the underlying data for these securities was not publicly available.

This alleged misconduct began as early as 2001, became particularly acute between 2004 and 2007, and continued as recently as 2011.

Structured finance securities backed by subprime mortgages were at the center of the financial crisis.  These financial products, including residential mortgage-backed securities (RMBS) and collateral debt obligations (CDOs), derive their value from the monthly payments consumers make on their mortgages.

“The complaint filed in state court today alleges that investors as well as others in the market were misled by Standard and Poor’s promises that its analysis was independent and objective. Unfortunately, as the complaint alleges, this was not the case, and ratings of mortgage backed securities and collateral debt obligations were influenced by the desire to continue earning lucrative fees,” Attorney General Cooper said. 

Tennessee’s lawsuit seeks relief to stop S&P from making misrepresentations to the public; change the way the company does business; and civil penalties and disgorgement of ill-gotten profits.

The congressionally-appointed bipartisan Financial Crisis Inquiry Commission concluded in its final report that the financial crisis “could not have happened” without ratings agencies such as S&P.

The State’s Complaint may be found on the Attorney General’s website by going to www.tn.gov/attorneygeneral and clicking on “Filings of Interest.”

 


Michelle Consiglio-Young Joins Courts As Legislative Liaison, Assistant General Counsel

   Michelle Consiglio-Young has been named legislative liaison and assistant general counsel for the Tennessee Administrative Office of the Courts. In this role, she will be drafting and tracking legislation for the judiciary, following other proposed legislation, assisting members of the General Assembly with information about Tennessee courts, informing members of the ... (click for more)

Labor Market Is Focus Of Dalton State Business Newsletter

The status of the workforce and labor market statistics of the Northwest Georgia region is the focus of the newest issue of “Business Analytics,” a biannual publication of the Center for Economic Research and Entrepreneurship of Dalton State College’s School of Business. The newsletter, which is available both online and in print, contains an analysis of regional job growth ... (click for more)

Chance Loftis Set To Be Freed From Jail After Jury Finds Him Guilty Of Only Misdemeanor Charge

Chance Loftis is set to be freed from jail on Monday after a Criminal Court jury on Friday afternoon found him guilty of only a minor charge. Instead of murder in the death of 46-year-old Donald Rogers, the jury in the courtroom of Judge Don Poole found him guilty of the lesser charge of reckless endangerment. He was found not guilty of aggravated animal cruelty in the beating ... (click for more)

Dr. David Seaberg Steps Down From Position As Dean For UT College Of Medicine In Chattanooga

David M. Stern, MD, executive dean of the University of Tennessee College of Medicine at UT Health Science Center (UTHSC), and Kevin Spiegel, president and CEO for Erlanger Health System, announced that  David Seaberg, MD, will be stepping down from the joint positions of dean of the UT College of Medicine, Chattanooga, and senior vice president of the Erlanger Health System. ... (click for more)

It's Time To Insure Tennessee - And Response

Tennessee has a problem.  What is the value of saving the lives of 1,000 Tennesseans each year? That is exactly what can be expected if 176,000 Tennesseans gain health insurance through Insure Tennessee. A New England Journal of Medicine study showed that expansion of Medicaid was associated with a 6% reduction in yearly mortality for people in the 34-65 age group. Statistically, ... (click for more)

Roy Exum: The Magic Bank Account

As the month of January is almost out the door, I am opening my email today to share a marvelous story that legend has it was printed on piece of paper found in Bear Bryant’s wallet when he died in 1983. While I don’t know that the famed Alabama football coach had this lesson in his wallet, chances are he might have if he’d read it. * * * THE BANK ACCOUNT & RULES Imagine ... (click for more)