At last - Justice !

When the " Great Financial Crisis " hit in 2008 a lot of people lost a lot of money.  Superannuation fund levels nosedived.   Shares dropped in value across the world's trading boards.  Many gilt edged securities became worthless overnight.   It was apparent that financial institutions had been lax to the point of criminality in their dealings with the public - but almost nobody faced a court and went to gaol.

Public money bailed out financial institutions, and the very same people who created this mess remained in their plush seats, and when the uproar died down - continued to do precisely the same dubious trading moves and once again received obscene amounts of money from the " bonus pool ".

Now - at long last - a Federal court has delivered a ruling that will rock the financial world in it's tracks.The court has decided that incompetence was involved in a case where thirteen local councils were induced to put their cash reserves into " Constant Properties Debt Notes ",.   The councils lost $ 30 million when their investment declined in value by ninety-three percent.

The court found that ratings agency Standard and Poors should not have conferred a AAA rating on these securities.   Offering securities with a " no risk " status was a cosy little internal arrangement between rating agency Standard and Poors,  their investment bank ABN Amro and a firm specialising in giving financial advice to councils - Local Government Financial Services. ( LGFC ).

The cat is now well and truly amongst the pigeons.   The way is open for those councils to redeem their lost funds and the door is opening for many more claims to go through the court system to place the blame squarely on the head of those who either failed to adequately investigate offers being made or bestowed credit ratings that were inconsistent with risk.

Of course, these findings will be aggressively challenged in the appeals courts, but the Federal court has found that when an entity bestows a security rating that is stock in trade for it's existence, it has a responsibility to do that fairly and with diligence.   With the power to influence financial decisions - comes responsibility !

It seems inconceivable that in the years since the GFC we are still taking credit advice from the same institutions that failed us miserably with financial advice, and that it is these credit rating agencies who determine the rate of interest that the governments of countries across the world will pay on their borrowings.

At least the Federal court has had the guts to apportion blame where it is due, and hold the culprits responsible.   If making good drives these firms out of existence by way of the bankruptcy court it will clear the way for the emergence of new institutions.

Rating the stability of the finance world is the corner stone of financial sustainability.   We need that function to be in good hands, free of the taint of past malpractice.    That is yet to happen !