Mortgage “Cop” Marc Dann Pursues Credit Rating Agencies
By Stephen Otto, Pennsylvania Bankruptcy Attorney on Oct 10, 2007 in State Specific Bankruptcy Issues
Marc Dann, the Attorney General of Ohio since 2006, is digging very deeply into the mortgage mess created by the aggressive origination of substandard loans and their immediate resale to Wall Street investors. According to the October 8th edition of the Wall Street Journal, soon after taking office in 2006, Mr. Dann hired a high-powered corporate “tall building” attorney to investigate the relationship between subprime mortgage origination, securitization, and credit rating agencies like Standard and Poor’s (owned by McGraw-Hill Company), Moody’s Investor’s Service, and Fitch Ratings
(owned by Fimalac, S.A.).
When consumer advocates and consumer attorneys discuss ways in which to tackle the mortgage debacle, ratings agencies are often mentioned but are seldom discussed as being a potential target. For this reason, Mr. Dann’s efforts are noteworthy.
Mr. Dann believes that had the credit rating agencies not done their job in acting as, in essence, “boosters” or “chearleaders” of mortgage-backed securities, the incentive to sell risky mortgage products to consumers who oftentimes were not in a position to be able afford such products would not have been present.
For the time being, the credit rating agencies believe that aspersions are being cast by Mr. Dann’s team without justification. Richard Morvillo of Mayer Brown LLP states that Mr. Dann has “condemned [ratings firms] as aiders and abetters without a full-fledged investigation”.
Source: Wall Street Journal.
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