US pension fund sues over losses

Credit rating agencies have been accused of causing major losses

The biggest US public pension fund, Calpers, has sued the three largest credit rating agencies for not highlighting risks in its investments.

It has filed a case against Moody's, Standard & Poor's and Fitch for giving perfect ratings to funds which suffered from the sub-prime mortgage market.

The structured investment vehicles, or SIVs, which had triple-A ratings, may have cost it $1bn, Calpers said.

S&P's parent company said the claim was "without legal or factual merit".

Calpers, Moody's and Fitch did not comment.

By giving the SIVs the highest possible rating, the agencies had made "negligent misrepresentations", claimed Calpers, which is the Californian Public Employees' Retirement System.

The gradings had proved to be "wildly inaccurate and unreasonably high", it added.

Losses

Credit rating agencies have been blamed for playing a major role in causing the current global credit crunch.

The agencies carry out work to determine the worthiness or otherwise of financial investments.

They have been accused of failing to spot the size and risk of the bad US housing debt that was resold around the world, causing multi-billion-dollar losses.

It was the discovery of these losses that caused the global credit markets to freeze up, and ultimately led to governments around the world having to bail out their banking sectors.