Professor Hunt Comments on Standard & Poor's Suit for Sacramento Bee
Professor John P. Hunt commented for the Sacramento Bee on lawsuits filed by the California Attorney General against the credit rating agency Standard & Poor's. The suit claims that by irresponsibly giving its highest rating to high-risk securities backed by questionable mortgages, S&P caused the California Public Employees' Retirement System and the California State Teachers' Retirement System to lose approximately $1.7 billion when financial markets collapsed in 2009.
Professor Hunt said that while ratings agencies have successfully defended against similar lawsuits in the past, the fact that California and the federal government are suing Standard & Poor's probably increases the likelihood that the state employees' pension systems may prevail.
"I'd be shocked if it didn't help CalPERS," said Hunt. "Having the federal government sue you, and now the attorney general of the largest state, changes the conversation," he said.
Professor Hunt's primary area of scholarly interest is the regulation of financial markets and institutions, including the role of credit-rating agencies in capital regulation and potential changes to their regulation that could mitigate the effects of financial bubbles.