Connecticutâ€™s Attorney General has told a congressional hearing that itâ€™s time to end the dual rating system for government and municipal bonds. Municipalities contend the system amounts to a secret tax.
When cities and towns in Connecticut and around the country issue bonds, they are rated by credit agencies on Wall Street. Currently government bonds are rated on a more stringent standard than are those issued by corporations. A lower credit rating can mean paying a higher interest rate on the debt. The House Financial Services Committee held a full day of hearings on the system Wednesday. Giving testimony, Connecticutâ€™s Attorney General Richard Blumenthal told the committee the system is needlessly costing municipalities millions of dollars every year.
"This system is not just unfair and unwise as a matter of public policy, itâ€™s also in how itâ€™s been perpetuated and sustained, quite possibly illegal, under our state and federal anti-trust laws."
Blumenthal says his office has been conducting an investigation into the system, including what he says is collusion among the bond rating agencies to sustain the two tier arrangement.