September has not been a good month for rating agencies. Earlier in the month, U.S. District Court Judge Shira Scheindlin ruled that agency ratings were not deserving of broad protection under the First Amendment of the U.S. Constitution. Now, California Attorney General Edmund Brown Jr. launched an investigation into credit rating agencies' role in fueling the financial crisis, and the Securities and Exchange Commission (SEC) voted to increase oversight credit ratings agencies.

 Brown issued subpoenas to Standard & Poor's (S&P), Moody’s and Fitch to determine whether the firms violated California law when they gave "stellar ratings to shaky assets." He contends that at the peak of the housing boom, these agencies gave their highest ratings to complicated financial instruments—including securities backed by subprime mortgages—making them appear as safe as government-issued Treasury bonds. "Standard & Poor's, Moody's and Fitch put their seal of approval on high risk mortgage-backed securities, recklessly giving stellar ratings to shaky assets that proved toxic to the entire financial system," Brown says. "This investigation is meant to determine how these agencies could get it so wrong and whether they violated California law in the process."

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