Sen. Franken’s Statement on New Effort by Dept. of Justice to Crack Down on Credit Rating Agencies
DOJ is Preparing Lawsuit Over Inflated Credit Ratings That Played Large Role in 2008 Financial Meltdown
Today, U.S. Sen. Al Franken (D-Minn.) released the following statement after an announcement that the Department of Justice is preparing a new lawsuit to crack down on Moody's, one of the nation's three biggest credit rating agencies.
The credit rating industry played a large role in bringing down the American economy in 2008 after giving the highest possible ratings to extremely risky mortgages in exchange for more business from the banks. When the mortgages went bust, millions of unwitting Americans suffered as a result.
"During the 2008 financial meltdown, Wall Street cut the ground out from under millions of hardworking Americans who lost their jobs, homes, and retirement savings," said Sen. Franken. "And at the heart of the crisis was an inherent conflict of interest between credit rating agencies-like Moody's, Fitch, and S&P-and big financial institutions like banks. We can't let Wall Street be above the law, which is why I wrote legislation to rein in these rating agencies and end their scheming. We must have a fair and honest credit rating industry in this country, and I am glad the Department of Justice has pursued this matter."
After the 2008 financial collapse, Sen. Franken made it one of his top priorities to prevent something similar from happening again. He wrote an amendment to Dodd-Frank-a legislative package to reform Wall Street-to restructure the credit rating industry and ensure rating agencies are rewarded for accurate ratings, not for offering their stamp of approval to the highest bidder. Unfortunately, the Securities and Exchange Commission used their authority to pursue a more limited reform that fails to address many of the fundamental flaws in the industry. That means many of the inherent conflicts of interest that existed in the ratings agencies before 2008 still exist today, and that the financial stability of millions of hardworking, middle-class Americans and families is still at risk.
You can read more about Sen. Franken's amendment by clicking here.