The California Public Employees’Retirement System (CalPERS) yesterday threw its weight behind an effort thatcalls on the nation’s three leading rating agencies – Fitch, Moody’s andStandard & Poor’s – to reform their methods for rating government-issuedbonds.
The CalPERS Board ofAdministration joined 15 major municipal bond issuers across the country,including
Leaders of the pension fundbelieve the bond rating system should be fair, accurate and transparent.
“It is in our best interest toensure that the rating system better serves all investors and taxpayers,” saidRob Feckner, President of the CalPERS Board, in a statement. “A fair rating system is key to an efficient and transparent market, animportant goal for CalPERS.”
At issue for municipal bondissuers is the current dual rating system, where municipalities are held to ahigher standard than corporate issuers.
In a letter to the rating agenciesthey said, “Many collateralized debt obligations and structured investmentvehicles that your agencies rated triple-A have become insolvent or are at riskof insolvency. As a result, youragencies have been forced to downgrade those securities, as well as the ratingsof some of the bond issuers who guaranteed them. Meanwhile, the vast majority of municipalissuers have not shown strains that would suggest they may default on theirbonds. Nonetheless, many strongmunicipal issuers continue to carry much lower ratings than our corporatecounterparts, in some cases even lower than the bond insurers about whom themarket has understandable concern.”