Washington may make credit raters pay for bad calls in financial crisis

Washington state joined more than a dozen states Tuesday in a lawsuit against Standard and Poor’s, the credit rating agency. New Attorney General Bob Ferguson says this is a first step and there is a possibility, after further investigation, that they may seek restitution.

“We’ve filed our complaint. We’ve joined 17 other states and the Department of Justice, right now we’re asking our complaint that Standard & Poors stop their bad practices,” Ferguson tells Seattle’s Morning News. “Down the road, we may amend our complaint to seek restitution and civil penalties.”

The State Attorney General’s office claims Standard and Poor’s misled investors and inflated the value of residential sub-prime mortgage-backed securities that were at the center of the nation’s financial crisis.

Washington is joining a U.S. Justice Department lawsuit and will ask a court to force Standard and Poor’s to change the way it does business.

“When I ran for attorney general last year, one thing I said all the time was, our office, the office of attorney general, our job is to stand up to powerful interests and hold them accountable when they don’t play by the rules, and that is what’s going on here,” says Ferguson.

Ferguson says it’s too soon to tell how much loss was sustained in Washington due to Standard and Poor’s ratings, but he says these types of credit rating agencies are responsible for ratings of securities that are often included in mutual and pension funds, that are a big part of people’s retirement and investment strategies, and for those impacted it’s a very serious thing.

“For most people in our state, they don’t have the ability to hire a high price attorney to hold those interests accountable,” says Ferguson. “That’s what the office of attorney general does, that’s what our lawyers and our staff do every day, and that’s why we’re filing this lawsuit and joining 17 states, to hold this particular interest accountable for actions they’ve taken that have harmed so many individuals.”

Ferguson says his office is continuing the investigation.

“The discovery will go on, and as things move forward as we unearth additional information and additional evidence we may amend that complaint, as I said, to go after civil penalties or restitution, whatever is appropriate under the law.”