Jerry Brown, the Attorney General of California, has said that he will take Moody’s Investment Service Inc., a New York based credit rating agency, to Court as the company is refusing to comply with the state subpoena.
The subpoena asks for certain documents needed for an inquiry into the company’s evaluation of mortgage backed securities, which were seen as a key reason behind the financial crisis. It is suspected that the company indirectly had a role to play in the crisis and the subsequent economic recession.
Moody’s hiding information
Brown claimed that the lawyers of the company are avoiding the subpoena and have dismissed it as immaterial. During a recent press conference, Brown accused Moody’s of deceiving the people of California and indulging in illegal and unethical behavior. He added that the company is trying to hide information and is delaying the legal process.
The spokesperson for Moody’s, Michael Adler, stated that the company had been cooperating with Brown’s team and would continue to do so. He said that they have already given thousands of pages of documents on the request of the California government and they will keep providing any further information that is required. He explained that the company does not have the documents that Brown is asking for.
Standard and Poor’s and Fitch also in trouble
Meanwhile, Brown claims that the rating agency was an important part of the group of bankers, brokers and lenders who tried to hide the housing bubble even when they saw clear signs of trouble. Two other credit rating companies, Fitch Inc. and Standard and Poor’s have also being issued subpoenas. These firms lowered their ratings for mortgage backed securities only after the housing bubble burst.
Moody’s and Standard & Poor’s were taken to court last month by Richard Blumenthal, the Attorney General of Connecticut on the same grounds. It was argued that the companies had given a high rating to mortgage-backed securities even when they knew of the impending collapse.
Brown told the media that he has prepared a list of more than 50 questions for Moody’s and has sent it to the company. Some of the questions deal with the possibility of a conspiracy between the firm and Wall Street banks. Investigators are trying to understand whether the ratings issued by the company were completely independent.
Brown has approached the court for getting an order to ensure compliance from Moody’s. He wants the court to ask the company to cooperate with the investigation so that any resistance on their part is seen as contempt of court.