State Attorney General Richard Blumenthal has subpoenaed well-known credit rating agencies, Moodys, Fitch, and Standard & Poor's over a Federal Reserve policy that will steer business their way. Blumenthal believes the policy violates anti-trust laws.
The Federal Reserve requires investors to receive ratings from at least two of these agencies in order to get loans from the federal Term Asset-Backed Securities Loan Facility or TALF program.
Blumenthal says the rule is unfair to six other credit rating agencies who are just as qualified to do the work. He also says Standard and Poors, Fitch, and Moodys will be rewarded despite their role in the economic crisis.
"The same companies that overrated the bonds regarded now as toxic assets will receive windfall fees and be given exclusive franchise to rate the new securities issued under the program supposed to correct their past mistake."
Blumenthal's characterization of the companies past ratings come from testimony by former Federal Reserve chairman, Alan Greenspan, who told the House Committee on Oversight and Government Reform the agencies overrating of securities was the core problem with the financial markets.
The Attorney General's office has also sent a letter to Federal Reserve Chairman, Ben Bernanke asking him to amend the policy so to encourage competition in the credit ratings market.