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News Mar 8, 2012 - 1:14 PM

AG: Continuing work on banking issues

By Attorney General George Jepsen's office

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HARTFORD, CT - Attorney General George Jepsen joined other Attorneys General this week to continue work on their investigation into issues that contributed to the nation’s financial crisis and were not resolved by the historic $25 billion mortgage foreclosure settlement with the nation’s largest banks.

Attorney General Jepsen was a member of the executive committee and negotiating team that produced the agreement last month, the largest joint federal-state settlement in history. He will serve on the committee monitoring implementation of the foreclosure settlement.

“The mortgage foreclosure settlement dealt with an important part of the interconnected conduct that led to the financial crisis,” Attorney General Jepsen said. “Now we are turning our attention to the problems that were the root cause of the crash.”

Attorneys General are now focusing on legal claims involving securitization, the credit rating agencies and mortgage electronic recording services, among others. They met in Washington this week during the spring meeting of the National Association of Attorneys General to organize and plan the next phase in their ongoing investigations of the financial crisis and financial fraud.

The states shared information and discussed coordinating their investigations of how mortgages were securitized on Wall Street; third-party vendors used by banks; potential claims by state pension funds and deceptive marketing of securities. Attorneys from Jepsen’s office described the investigations into their pending cases against Moody’s Investors Service, Inc. and Standard & Poors.

The separate lawsuits, filed in March, 2010 related to alleged misrepresentations the companies made about their analysis of structured finance securities. Those lawsuits are pending in Connecticut Superior Court.

Last October, Connecticut reached a $900,000 settlement with the three major credit rating agencies: Moody’s Investors Service, Inc., Standard & Poor’s, and Fitch, Inc., resolving claims that the companies allegedly misrepresented the meaning of their public bond credit ratings and unfairly gave lower credit ratings to public bonds.

After the office filed the lawsuits in July, 2008, the credit rating agencies abandoned their dual ratings which resulted in the upgrade of the bond ratings for many cities in Connecticut, and the resultant savings of millions of dollars over time. The federal Dodd-Frank Act now requires rating agencies to rate municipal bonds on the same scale as other bonds, a key demand of the Connecticut lawsuits.

Jepsen said Connecticut would be active in assisting the Attorneys General investigations of the two biggest financial issues involving the credit-rating agencies and securitization. Also, his office will continue the Moody’s and S&P litigation.

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