- 07 Feb 2008 at 4:44 PM
“Too little. Too late.”
That’s how New York Attorney General Andrew Cuomo described the reforms proposed by Standard & Poor’s and Moody’s Investors Service in the wake of the subprime debt ratings catastrophe. Both S&P and Moody’s have recently announced plans to strengthen their ratings system in an attempt to restore their credibility and fend off regulatory or legislative action. But these proposals—which include rating have been met with skepticism and mockery. (More mockery here.) Cuomo referred to them as “supposed reforms.”
“Both S&P and Moody’s are attempting to make piece-meal changes that seem more like public relations window dressing than systemic reform,” Cuomo said in a statement about his investigation into the ratings agency.
Cuomo didn’t describe exactly what actions his office is planning on taking, but according to Charlie Gasparino and the Wall Street Journal he is considering employing the Martin Act to go after wrong-doing in the mortgage meltdown. This is the breathtakingly powerful state securities law that grants the Attorney General broad investigatory and prosecutorial powers. It lay nearly dormant for three-quarters of a century after it was passed. The Martin Act was used to go after smaller boiler room type operations but never against the big Wall Street firms. At least, not until Eliot Spitzer discovered the law and used it to tear into Merrill Lynch. After that, Spitzer rampaged across Wall Street wielding the Martin Act to force enormous settlements from a dozen or so firms.
Why is the Martin Act such a big deal? A 2004 Legal Affairs article by Nicholas Thompson describes the terrifying power of the AG under the law:
To win a case, the AG doesn’t have to prove that the defendant intended to defraud anyone, that a transaction took place, or that anyone actually was defrauded. Plus, when the prosecution is over, trial lawyers can gain access to the hoards of documents that the act has churned up and use them as the basis for civil suits. “It’s the legal equivalent of a weapon of mass destruction,” said a lawyer at a major New York firm who represents defendants in Martin Act cases (and who didn’t want his name used because he feared retribution by Spitzer). “The damage that can be done under the statute is unlimited.”
Interestingly, Spitzer first hatched the plan to use the Martin Act against Wall Street after a meeting with a securities lawyer named Eric Dinallo—the same guy who has been attempting to strong arm Wall Street into bailing out Ambac.
Cuomo Says S&P, Moody’s Reforms Won’t Stop His Probe [Bloomberg]
- Investigating The Ratings Agencies February 7, 2008
- Groundbreaking Research Reveals Junior Bankers "Fairly Pleased About" Not Working 100 Hour/Week Anymore August 19, 2014
- Summer Associate Offer Watch '14: JP Morgan, BofA, Goldman Sachs, Citi August 15, 2014
- Wedbush Securities Is In Trouble (Again) August 19, 2014
- Fake, Unregulated Currency Not Unregulated Enough For Some August 18, 2014
- Carl Icahn Assigns @Carl_C_Icahn Twitter Feed As Required Reading August 19, 2014
- Opening Bell: 08.19.14 August 19, 2014
- Uber Is Getting Into The Prophylactic Business August 19, 2014
- Wells Fargo's Code Name For Growth Plan Might As Well Be "Project Big Fat Slob" August 19, 2014
- Caption Contest Tuesday: Someone Looks Like He's Enjoying This A Little Too Much August 19, 2014
- Executive Editor
- Bess Levin
How Can We Help You?
- Send tips to:
- For tech issues email:
- For advertising or events email:
- For research or custom solutions email:
- Dealbreaker is published by Breaking Media.
For a full list of our sites, services and staff visit breakingmedia.com