Calpers Sues Bond Ratings Agencies

Roundly vilified for their role in the financial crisis, the credit-ratings agencies are now the subject of a dose of revenge.

The California Public Employees' Retirement System, or Calpers, one of the country's biggest and most visible institutional investors, has sued the three agencies -- Moody's, Standard & Poor's (owned by McGraw-Hill(MHP Quote)) and Fitch Ratings -- essentially alleging malfeasance.

In a suit filed Tuesday in California Superior Court in San Francisco, Calpers says the agencies gave their most gold-plated imprimatur to what eventually turned into junk, in all senses of that word: the so-called "structured investment vehicles," those enormous baskets of diseased assets such as subprime mortgages that were securitized and sold to investors, spreading the virus that eventually grew into a pandemic, seriously damaging such behemoth institutions as Bank of America(BACl Quote), Citigroup(Cl Quote) and AIG(AIG Quote). ...