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Calpers is taking on the credit agencies - and it's about time someone did.

In the biggest challenge yet to Moody's ( MCO), Fitch and McGraw Hill's ( MHP) Standard & Poor's unit, the biggest U.S. public pension fund filed a lawsuit in California putting the blame on the ratings agencies for $1 billion in losses, according to the New York Times.

Many have complained that the credit ratings agencies were complicit in the credit crisis because they slapped their top ratings onto just about every type of wild investment package concocted by various hedge funds, banks and financial companies. No one has been able to prove it so far.

These investment packages bundled all kinds of questionable assets including subprime mortgages, the high-risk housing loans that lenders like Bank of America's ( BAC) Countrywide unit, Citigroup ( C) and others handed out willy-nilly during the housing boom.

Yes, we're talking about the same loans that later contributed to record foreclosures across the country and contributed to the global financial crisis.

Calpers, aka the California Public Employees Retirement System, says the rating agencies were "wildly inaccurate" and "made negligent misrepresentations" in their assessment of these new-fangled securities, according to the Times, and -- even more damning -- that the entire model is fraught with conflict of interest because the agencies are paid to provide ratings by the very same companies issuing the investment packages, according to the Times.

Sure, we've heard this all before (check out TheStreet.com's Who's to Blame series from March).

But nothing happened. It looked like the ratings agencies were going to be let off the hook. Until now.

This is a bold move by Calpers to take their case to the courts rather than wait for the government to overhaul the financial system. Who knows what political maneuvering and lobbying will do to the government plan. That doesn't matter now -- the California Superior Court in San Francisco gets to decide the fate of the ratings agencies.

This will be a good spectacle that may prompt more lawsuits against the agencies. Trillions of dollars have been lost on all the fancy securities that sprang forth during the heyday of the housing boom -- and the ratings agencies doled out their highest seal of approval on many of those investment vehicles.

It will be interesting to see what the ratings agencies have to say for themselves. They all declined to comment for the Times, but they are welcome to offer their explanations to TheStreet by sending an email to the editor.

I won't hold my breath.

Glenn Hall is the editor of TheStreet.com. Previously, he served as deputy editor and chief innovation officer at The Orange County Register and as a news manager at Bloomberg News in Frankfurt, Amsterdam and Washington, D.C. As a reporter, he covered business and financial markets, worked in both print and television in the U.S. and Europe, and conducted in-depth investigative coverage at The Journal-Gazette in Fort Wayne, Ind. His work also has been published in a variety of newspapers including The Wall Street Journal, The New York Times and International Herald Tribune. Hall received a bachelor's degree in journalism and political science from The Ohio State University and a certificate in project and program management from Boston University.

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