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Complaint targets credit rating agencies

The National Community Reinvestment Coalition filed an SEC complaint today against credit rating agencies for their role in the implosion of the mortgage and credit markets.

NCRC charges that Fitch, Moody’s, and Standard & Poor’s “knowingly issued false and inflated ratings for securities backed by problematic high-cost loans that have created a financial nightmare for millions of families across the country whose homes have been lost to foreclosure or are now in jeopardy of foreclosure.”

Because rating agencies are paid by the companies whose bonds they rate, NCRC president John Taylor said the agencies suffer from “an inherent conflict that created one of the worst financial crises this country has ever faced.”

NCRC charges that the rating agencies made public misrepresentations about the soundness and reliability of securities ratings, fueling imprudent mortgage lending and irresponsible secondary market purchases of residential mortgage-backed securities and contributing to the foreclosure crisis.

“The foreclosure crisis demonstrates that the key way to ensure safety and soundness of the financial system is to ensure proper financial services protections for consumers in the credit markets,” Taylor said. “As long as short-term bank profitability is the sole or principal measure of safety and soundness, crises like the one we face today could again occur.”

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Category: banks & credit, economy, foreclosures, housing

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