AG Cordray speaks in D.C. re: lawsuits for Ohio retirement systems

From John Curry, May 29, 2010

http://www.ohioattorneygeneral.gov/Briefing-Room/News-Releases/May-2010/As-Congress-Hashes-Out-Financial-Sector-Reform,-Co

As Congress Hashes Out Financial Sector Reform, Cordray Gives the Ohio Backstory
5/27/2010 (News Release)

(WASHINGTON, D.C.) — At the invitation of legal leaders in the nation's capital, Ohio Attorney General Richard Cordray today spoke to the District of Columbia Bar Association about Ohio's decision to sue Wall Street rating agencies Standard and Poor’s, Fitch and Moody's for their role in the global economic crisis.

Both houses of Congress have recently passed financial reform legislation, and legislators are now considering two amendments that would regulate the rating agencies.

Ohio filed suit against the rating agencies in federal court last November on behalf of five Ohio public employee retirement and pension funds. The lawsuit alleges the agencies provided false and misleading ratings of mortgage-backed securities in exchange for lucrative fees from the securities issuers. According to preliminary estimates, the improper ratings cost Ohio’s public pension funds in excess of $457 million.

Congressional hearings have documented that 91% of the AAA subprime residential mortgage-backed securities issued in 2007 and 93% of those issued in 2006 have now been downgraded to junk status.

In the speech, Cordray described the role of states in holding Wall Street accountable and promoting reform:

“Ohio’s pension funds are some of the largest institutional investors in the world, with over $150 billion in assets. We are fighting for their members – the firefighters, police officers, teachers, public servants – and for the many others who were hurt by the wrongdoing that came with Wall Street’s binge. A sound pension to see a person through their retirement years – the keeping of promises made to the participants over many years or even a lifetime of steady work – is the very essence of economic security.

“As lawyers for some of the largest institutional investors in the world, I believe we are in a good position to try to unearth misconduct that causes them to lose money, as Congress recognized in shaping the federal securities laws.

“Ohio and the other states play a vital role in policing the marketplace. Indeed, during the troubled times of the past decade, the state attorneys general were practically the only cops on the beat who took seriously their responsibility to protect average American households who cannot afford their own lawyers.

“For this reason, during the current Washington debate on Wall Street reform, we have fought tenaciously against legions of lobbyists who are seeking to preempt state authority in order to remove attorneys general from our traditional role. We are heartened that the effort to sideline state authorities in the financial reform bill seems mostly to have failed, at least so far.”

To read the speech, visit www.OhioAttorneyGeneral.gov/TakingOnWallStreet.

For background on Ohio’s other securities cases, visit www.OhioAttorneyGeneral.gov/SecuritiesLitigationBriefing.