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WSJ: Ohio AG files lawsuit agains the despotic regime of rating agencies: Fitch, Moodys and S&P. The 77-page complaint alleges the agencies gave inflated ratings to MBS (residential mortgage securities) and cites other testimony from congressional hearings and former rating agency employees that gave testimony of negligent business practices.
The suit if focused on Ohio's public retirement fund that was AAA rated and yet lost $457 million. I previously blogged on how the rating agencies attempted to invoke the 5th Amendment at the congressional hearings! Why? What do they have to hide?
Trend & Environmental Risk Significance - potentially huge. Insurance companies have already dropped the 3 rating agencies for their bond investments ratings. Insurance companies are 'institutional investors' and are under stringent security regulations to invest in highly-rated securities. Such securities are backed by commercial properties - that need Phase Is. Rating agencies are losing significant clout in the financial world - and it will likely carry over to other institutional investors - see my forum topic on REITS.
Dianne Crocker and I recently discussed a new CMBS issuance 'rated' by the agencies. Would you trust their AAA rating? I personally have invested in MBS as you can now buy such bonds at 60 to 70 cent on the dollar and get a 6% coupon - for a total return of 9-10%. These are (were) AAA rated. Guess what? Even after these new securities stripped out the 'toxic' mortgages and were re-rated AAA - they still ended up a few months later being downgraded to BBB- and I am sitting on a paper loss!
In my previous life - rating agencies (a few individuals in particular) literally dictated how environmental insurance was to be structured and hence the environmental reports supporting said policies. They had no idea how the insurance worked - but their word was infallible. Meet their despotic requirements or get "dinged" as an issuer of the securities.
Where are these people today? Capitalism is what makes this country great and the commercial real estate industry supports a huge percentage of environmental consultant's work. I think it's our responsibility to question people that have that much 'say-so' and demand accountability and transparency.
Recent Comments (1 of 1)
- April 25, 2010 by EdG: WSJ (4/24/10) " Raters Grilled Over Relationship with Bankers ". It's...
Testing for pharmaceuticals & personal care products in the drinking water supplies is an environmental trend advocated by nonprofits.
According to the US EPA there are many drug classes of concern found in the nation's drinking water supply and currently there are no regulatory means to prohibit it.
Such pharmaceutical pollutants (anti-depressants, antihistamine, steroids) get into the drinking water system in one form or another - surface and waste water, storm water - and right now the effects are unknown.
Recent Comments (1 of 1)
- January 21, 2010 by Ms.Merrimack: Unfortunately, there are still no regulations on protecting the health...
WSJ: Dec 2, 2009 - JP Morgan finances $625 million backed by 300 retail properties owned by the REIT Inland Western Retail Real Estate Trust, Inc.
Another CMBS deal is in the works worth $460 million backed by properties owned by Fortress Investment Group - and led by Bank of America. The issuance is not expected to use TALF.
NY Appeals Court ruled (Nov 30, 2009) in favor 6-1 of the developer in the biggest eminent domain case since the now infamous U.S. Supreme Court case Kelo v. City of New London, 545 U.S. 469 (2005).
The developer Brooklyn based Forest City Ratner Cos. already has purchases 85% of the land for the proposed 22-acre development which includes a sports arena of the NJ Nets.
Barclays Investment Bank and eight other companies has signed on to the arena to be called Barclays Center - 18,000 seat sports and entertainment venue and retail space. The second phase includes 16 high rise towers for both residential and commercial uses (1/3 to be affordable housing) - some to be very high end condos!!!
The Barclays Center at $900 million is among the most expensive arenas ever built.
The argument for the "takings" of the private property (protected by the 5th and 14th Amendments of the Constitution) for "public benefit" included statements that the area was "blighted." The argument that the area was blighted includes $600,000 condos.
One private landowner purchased his area condo in 2003 for $539,000 - the government is offering $510,000 and making him, and everyone else move out, for the Nets. The developer is expected to build and sell luxury condos and sell them at a higher per square ft price than offered to private citizens that are forced by the government to move.
"Blighted" is the environmental nexus to this case.
Environmental Trend - eminent domain advocates struck another major victory but the backlash at the state level will likely be bigger with more states passing legislation precluding such takings.
Interesting Points - the landmark case of Kelo v. City of New London in 2005 - is worthy of a revisit today. In 2009 Pfizer the beneficiary of the eminent domain - announced it was leaving New London!!!
NYTimes Nov 21: Hacked Email Is New Fodder for Climate Dispute Yet again, I can't make this up and I did not hear of it for days after...
"Kevin Trenberth, a climatologist at the National Center for Atmospheric Research, and other scientists discuss gaps in understanding of recent variations in temperature. 'The fact is that we can't account for the lack of warming at the moment and it is a travesty that we can't, Dr. Trenberth.'"
In a 1999 email from Phil Jones, a longtime climate researcher ('pro-global warming'), states he had used a trick employed by another scientist, Michael Mann, to "hide the decline in temperatures." Mann, a prof. at Penn State confirmed the email was real.
First I am amazing the Times carried this story. Second, why isn't this making bigger news? This is the first I have heard of it!
Seems like there always is a hidden political agenda for such sensitive issues. Let's have transparency and deal with the truth - whatever it is!
- Topic posted November 24, 2009 by EdG
, tagged Environmental Case Law & Liability, Environmental InsuranceClean Harbors Environmental Services v. Boston Basement Technologies, Inc.
Issues: Insurance, Pollution Exclusion, Residential Spill, Strict Liability, Response Costs, Common Law Negligence/Property Damage
Facts: Boston Basement Technologies (BBT) was installing a waterproofing system at a residential home when they broke a heating oil line causing 150 gallons of heating oil to leak into the basement. The sump pump - pumped oil onto the yard. BBT hired Clean Harbors to clean the oil which cost $12,638. MA DEP issued notice to Boston Basement Technology that it was strictly liable (under M.G.L 21E) for cleanup costs and to hire a Licensed Site Professional to "manage, supervise, or actually perform the necessary response actions at the site."
BBT sought insurance coverage under its GGL policy (Admiral Insurance Co.). Admiral denied coverage citing the pollution exclusion in the contractor's policy stating that Clean Harbors services were response costs excluded under the policy.
Court Held: Admiral's policy covered BBT's liability in negligence (common law) for damage it caused to the property, including restoration costs. Case remanded to finder of fact (jury) as to what amount of the Clean Harbor services were covered under the "exception" to the policy's pollution exclusion.
Insurance and pollution exclusions under general liability policies can be "clear as mud." Noteworthy is that common law theory of liability is a means to an end in a lot of recovery cases.
Also noteworthy is that you never know where an environmental risk can stem from and generally speaking - unless you have specific pollution insurance - you will be fighting with your insurance company.
REITs are second only to financial institutions in raising equity = $23 billion this year. Simon Property Group, the largest U.S. real estate company, is considering buying one of its major competitors - General Growth Properties as GGP heads for bankruptcy.
Trend - plenty of cash in REITs, banks and equity investors to put back into the real estate market. Apparently they are still waiting for the bottom of the real estate market to jump back in and break the log-jam. While the recent CMBS issuance gives a modicum of hope - most analysts still feel the commercial real estate market has yet to reach the bottom.
Most such companies (including lenders) are probably waiting unit mid 2010 to begin to test the waters again.
WSJ: Will Bond Plan Have Teeth? Conservative underwriting of a new CMBS issuance backed by 28 Developers Diversified Realty Corp. shopping centers - the first CMBS issuance under the Federal Reserves Term Asset Backed Securities Loan Facility (TALF).
WSJ - Government officials and developers alike hope "this debt sale will pave the way for other CMBS deals and help uncork a market that had been one of the most important funding sources for commercial real estate in the past decade."
Trend - hopefully more conservatively underwritten CBMS issuance that are well received by institutional investors to come.
How can this possibly be important to Environmental Risk when there is no mention 'RECs?!?' Because with CMBS issuance comes a huge lending source and hence new batch of Phase Is to discuss "what is a REC."
EPA lawyers, Laurie Williams and Allan Zabel, openly criticized the Obama administration's proposed Cap and Trade legislation - and then the administration intervenes to censor their video on YouTube.
Environmental Trend - clearly as a society we see the benefits to curtailing pollution emissions and finding creative ways through financial incentives and off-sets to obtain corporate America to buy into it. But at what cost?
An environmental watchdog group, Public Employees for Public Responsibility accused the EPA of, "abusing ethic rules to gag two conscientious employees who have every right to speak out as citizens."
Is the trend - we want change to society's approach to the environment - but only if you agree with "my" approach to the change ... Do we want to encourage only one viewpoint and censor others because they have divergent information (let alone opinions)?
NJ signed into law in May 2009 the Site Remediation Reform Act and created a Licensed Site Remediation Professional (LSRP) program modeled after the long established Massachusetts Licensed Site Professional (LSP) program.
These are big changes! LSRPs, bound by a strict code of ethics, are now going to be directly 'part of the process' and a violation of the code of ethics can result in a license revocation.
My strong opinion is that such standards should be held for all EPs. Other professionals are held to an official code of ethics - including CPAs, lawyers, doctors. Why not Environmental Professionals? As a lawyer, if I violate my professional code of ethics I can lose my license and ergo my profession/livelihood.
EPs are in a significant position to influence the outcome of a site remediation for the long term and should be held to a higher standard.