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To this story about Connecticut taking legal action against the Big Three credit ratings agencies for giving artificially low marks.
To cities and towns across the state attorney general says the firms have created a rating charade.
Richard Blumenthal the Connecticut AG joining.
Now good to have sir thank you for coming on.
Thank you all right you're suing fiction -- Basis of the lawsuit is very simply.
That these ratings.
And unfair because they underrated.
Municipal debt compared to corporate debt in effect the result of a -- rating system.
That financially benefited the bond insurers.
And the rating agencies and some investors.
But all at the expense of taxpayers.
And of course the tent cities had to pay.
Unnecessary and unconscionable -- in insurance premiums to the bond insurers as well as higher interest rates and we say.
Billion dollars annually.
2.3 billion dollars paid by towns and cities as well as millions of dollars.
-- and payments by Connecticut taxpayers.
Should have been unnecessary but for a rating systems that unfairly.
Impose this tougher standard on Kansas City.
Can you prove mr.
Blumenthal that it was intentional because a lot of times these it ratings agencies we'll saying -- we were going.
With the information that we had available to us.
We can prove that it was intentional -- documents.
That we've obtained from the ratings agencies hotels including nine studies.
Nine separate studies by these rating agencies that show they were -- -- That towns and cities.
We're receiving lower ratings even though their credit worthiness was much higher than the corporate debt for example standard and poor.
In 2008 concluded.
That a triple A corporate bond was ten times more likely.
To default than a single a municipal bond and of course.
The city issuing that municipal bond had to -- on insurance -- or -- -- a lot of it's a lot know the answer is we can prove it.
And we believe that.
There ought to be reform of the system.
A level playing field as well as potentially damages.
That is restitution paid to the -- -- city.
Here's my question but you can point the finger and say this was a horrible system but they intentionally.
Deceived -- -- -- But you've got to put something else in place.
We know that say for example Warren Buffett's Berkshire Hathaway saw hey wait a minute I know these bond insurers are not going to be of good quality on the news today that stock is moving higher by 2000.
Dollars or one and three quarters percent.
Because he started his own bond insurance company that is triple rated but he could charge even higher rates now mr.
It doesn't matter it appears that taxpayers will still be paying millions in bond insurance.
There is a single.
You know if you compared to.
-- baseball strike some.
What we have here is to strike sounds.
One for the pitchers.
Who have really good arms and throw strikes all the time and the umpires have decided that.
The strike zone for them is going to be the size of my -- And the other -- all the other pictures.
Namely the corporate debt.
And those two separate standards if they were used in baseball would have everybody up in arms.
Whether it's Warren Buffett and per share and his bond insurer or any of the other bond insurers.
The single rating system will eliminate the need for them to -- -- -- that because they're more likely to have triple -- rating.
But there but again there's always that so called conflict of interest where some of the people being -- these organizations are actually paying for the research how do you avoid that problem.
That's a problem and you're absolutely right which is endemic.
To the present system whether it's corporate debt.
Or municipal debt.
The fact that the fees are charged.
To the customer whose own.
Or -- debt instruments are being rated is one that certainly deserves serious examination and by the way.
Our investigation is continuing into a potential antitrust violations and we may well seek reform in that area as well -- boy will you.
Come back on fox business and let us know next time when you've got something like that would love to hear about it thank you -- thank you Richard Blumenthal is the.
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