There doesn't seem to be anyway to keep some people happy. If these two firms had given low ratings to these securities in the past, they could have been sued (in theory) for making it difficult for certain people to get loans. Now they are being sued for giving "too high" of a rating. Here is the story from the LA Times:
In what is apparently the first legal action of its kind, an association of community-based organizations has filed a federal civil rights complaint against two of the three largest Wall Street rating firms, charging that their inflated ratings on subprime mortgage bonds disproportionately caused financial harm to African American and Latino home buyers across the country.
The complaint, filed by the National Community Reinvestment Coalition, alleges that Moody's Investors Service and Fitch Ratings enriched themselves by assigning high ratings to bonds backed by mortgages "that were designed to fail" because of "unfair payment terms and insufficient borrower income levels."
The firms "knew or should have known" that subprime loans disproportionately were marketed to minority consumers -- a process known as "reverse redlining" -- and that those borrowers would ultimately default and go into foreclosure at high rates, according to the coalition's complaint.
Fitch Managing Director David Weinfurter said the NCRC's filing "is fully without merit, and Fitch intends to defend itself vigorously." Moody's had no immediate comment. . . .
Moody's Investors Service and Fitch Ratings sued by the National Community Reinvestment Coalition
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Oleh
abudzar
