Ohio's attorney general sued the three biggest credit-rating agencies today on behalf of state employee retirement funds that lost $457 million in complex securities that imploded in the financial crisis. Richard Cordray alleges Moody's, Standard & Poor's, and Fitch conspired with issuers of the high-risk investments to give top ratings to products that ultimately proved fraught with risk. "At minimum, they were aiding and abetting misconduct by issuers," he said.
The suit is a potential blockbuster because the rating agencies have successfully defended previous legal actions against them by arguing their evaluations are opinions, and therefore protected by the First Amendment. But the sheer scope of the crisis combined with rating analysts' lack of discretion—one S&P employee said in an email that a deal "could be structured by cows and we’d rate it"—may mean a different outcome this time, reports the New York Times.