Tag Archives: Tennessee

S&P Must Face The Orchestra on Rating Failure

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After many state Attorneys General brought suit against S&P over the objectivity of their ratings, S&P sought to consolidate the cases in federal court. Judge Furman (SDNY) has issued an Opinion and Order in In Re:  Standard & Poor’s Rating Agency Litigation, 1:13-md-02446 (June 3, 2014) that remanded the cases back to state courts because “they arise solely under state law, not federal law.” (3) Explaining the issue in a bit greater depth, the Court stated,

there is no dispute that the States’ Complaints exclusively assert state-law causes of action — for fraud, deceptive business practices, violations of state consumer-protection statutes, and the like.The crux of those claims is that S&P made false representations, in its Code of  Conduct and otherwise, and that those representations harmed the citizens of the relevant State. (20, citation omitted)

The Court notes that in “the final analysis, the States assert in these cases that S&P failed to adhere to its own promises, not that S&P violated” federal law. (28) The Court concludes that it does not reach this result “lightly:”

Putting aside the natural “tempt[ation] to find federal jurisdiction every time a multi-billion dollar case with national  implications arrives at the doorstep of a federal court,” the federal courts undoubtedly have advantages over their state counterparts when it comes to managing a set of substantial cases filed in jurisdictions throughout the country. Through the MDL process, federal cases can be consolidated for pretrial purposes or more, promoting efficiency and minimizing the risks of inconsistent rulings and unnecessary duplication of efforts. (51, citation omitted)

S&P knew that it would have to face the music regarding the allegations that its ratings were flawed. But it hoped that it could face a soloist, one federal judge. That way, it could keep its litigation costs down, engage in one set of settlement talks and get an up or down result on its liability. The remand means that S&P will face many, many judges, a veritable judicial orchestra. In addition to all of the other problems this entails, it is also almost certain that S&P will face inconsistent verdicts if these cases were to go to trial. This is a significant tactical setback for S&P. From a policy perspective though, the remand means that we should get a better understanding of the issuer-pays model of rating agencies.

Mortgage Sustainability Tool Launched

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Freddie Mac has created a useful new tool, the Multi-Indicator Market Index(SM) (MiMi(SM)).The press release states that it is

a new publicly-accessible tool that monitors and measures the stability of the nation’s housing market, as well as the housing markets of all 50 states, the District of Columbia, and the top 50 metro markets.

MiMi combines proprietary Freddie Mac data with current local market data to calculate a range of equilibrium for each single-family housing market covered. Monthly, MiMi uses this data to show, at a glance, where each market stands relative to its own stable range. MiMi also indicates how each market is trending — whether it is moving closer to, or further away from, its stable range. A market can fall outside its stable range by being too weak to generate enough demand for a well-balanced housing market or by overheating to an unsustainable level of activity.

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In today’s first release of MiMi, several key findings emerged that highlight the current state of the nation’s housing market as of January 2014:

  • The national MiMi value stands at -3.08 points indicating a weak housing market overall. From December to January the national MiMi improved by 0.03 points and by 0.81 points from one year ago. The nation’s housing market is improving based on its 3-month trend of +0.17 points and moving closer to its stable and in range status. The nation’s all-time MiMi low of -4.49 was in November 2010 when the housing market was at its weakest.
  • Eleven of the 50 states plus the District of Columbia are stable and in range with North Dakota, the District of Columbia, Wyoming, Alaska, and Louisiana ranking in the top five.
  • Four of the 50 metros are stable and in range, San Antonio, Houston, Austin and New Orleans.
  • The five most improving states from December to January were Florida (+0.11), Tennessee (+0.11), Michigan (+0.09), Louisiana (+0.07), Nevada (+0.07), and Texas (+0.07). From one year ago the most improving states were Florida (+2.12), Nevada (+1.84), California (+1.26), Texas (+1.06) and D.C. (+1.05).
  • The five most improving metros were Miami (+0.11), Detroit (+0.10), Orlando (+0.09), San Antonio (+0.09), and Chicago (+0.08). From one year ago the most improving metros were Miami (+2.54), Orlando (+2.08), Riverside (+1.87), Las Vegas (+1.81), and Tampa (+1.77).
  • Overall, in January of 2014, 25 of the 50 states plus the District of Columbia are improving based on their 3-month trend and 35 of the 50 metros are improving.