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Calpers sues credit rating agencies over poor gradings

CALPERS, the biggest US public pension fund, has sued the three largest credit rating agencies for giving perfect grades to securities that later suffered huge subprime mortgage losses.<br /><br />The California Public Employees&rsquo; Retirement System said in a lawsuit filed last week in California Superior Court in San Francisco that it might lose more than $1bn (&pound;6.1m) from structured investment vehicles, or SIVs, that received top grades from Moody&rsquo;s, Standard &amp; Poor&rsquo;s and Fitch.<br /><br />SIVs are complex packages of loans and debt, including subprime mortgages and collateralised debt obligations, pooled by investment banks and which then issue debt to investors.<br /><br />By giving these securities their highest ratings, the agencies &ldquo;made negligent misrepresentations&rdquo; to the pension fund, Calpers said. Such ratings, which typically accompany investments with almost no risk of loss, &ldquo;proved to be wildly inaccurate and unreasonably high.&rdquo;<br /><br />Calpers is seeking unspecified damages.<br /><br />S&amp;P is a unit of McGraw-Hill, and Fitch is part of France&rsquo;s Fimalac. Moody&rsquo;s Corp is the parent of Moody&rsquo;s.