Ohio investigating ratings agencies

PIMCO's Bill Gross may think that credit ratings agencies like Moody's were dazzled by the "six-inch hooker heels" of investment securities backed by subprime loans, but Ohio's attorney general apparently sees them more as pimps than johns.

Fortune writers Katie Benner and Adam Lashinsky, say Ohio's public pension funds have invested some big dollars in mortgage-backed securities and collateralized debt obligations, and Attorney General Marc Dann is looking into the role the ratings agencies played in marketing them.

Dann and other critics say Standard & Poor's, Moody's, and Fitch -- which issue ratings that are intended to spell out the riskiness of such investments -- earn their fees from the same companies that issue them. The data on the securities that's provided by their issuers isn't vetted by the ratings agencies, critics say.

By continuing to rate mortgage backed securities "AAA," the ratings agencies were "among the people who aided and abetted this continuing fraud," Dann told Fortune. A spokeswoman for Dann confirmed to Inman News that an investigation into the ratings agencies' practices is underway.

Moody's defended its ratings, telling Fortune that while some MBS have lost value, none have defaulted. The company's opinions are "not tied to any recommendations to buy and sell," a spokeswoman said.

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