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Standard & Poor’s Sued for Inflated Ratings That Caused Investors to Lose Billions

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Kamala Harris

Attorney General Kamala Harris this week filed a lawsuit against one of the nation’s major credit rating companies for inflating its ratings of structured finance investments, which caused California’s public pension funds and other investors to lose billions of dollars.
The complaint, filed Tuesday in San Francisco Superior Court, alleges that the McGraw-Hill Companies, Inc. and Standard and Poor’s Financial Services LLC violated the False Claims Act and other state laws by using a ratings process based on what senior executives described as “magic numbers” and “guesses.”
“For years, S&P placed its priority on maintaining its market share, instead of the investors who trusted in its supposedly objective ratings,” said Harris. “When the housing bubble burst, S&P’s house of cards collapsed, and California paid the price—in billions. S&P must be held accountable for its conduct that contributed to one of our country’s worst financial crises.”
Investors relied on S&P and its competitors to rate these securities because they had access to only general descriptions of the assets backing their investments, which often included mortgages. California’s public pension funds also relied on S&P because they are often required to buy securities that received a coveted “AAA” rating, signaling that the investment was top-tier and bore minimal risk.
The complaint alleges that, from 2004 to 2007, S&P systematically misrepresented to the public, and to CalPERS and CalSTRS, that its ratings of structured finance securities were based on an independent, objective and reliable analysis, and not influenced by S&P’s economic interests.
In doing so, S&P lowered its standards for rating securities to gain market share and increase profits, and violated the False Claims Act by making false statements about the nature and risk of investments. The complaint also describes the company’s efforts to suppress the development of new and more accurate ratings models.
In mid-2007, the housing bubble burst. After securities that S&P had deemed the least risky began defaulting, S&P downgraded many residential mortgage backed securities investments. The market collapsed, and of those securities issued in 2007, more than 90 percent were downgraded to junk status.
The California Public Employees Retirement System (PERS) and the California State Teachers Retirement System (STRS) – two of the nation’s largest institutional investors – lost approximately $1 billion.
Harris was joined Tuesday by the U.S. Department of Justice and 12 other states and the District of Columbia in announcing lawsuits in Washington, D.C. The other lawsuits allege violations of the federal Financial Institutions Reform, Recovery and Enforcement Act and state unfair competition laws.
However, California’s suit is unique because it is being filed not only under California’s unfair competition laws but also under the state’s False Claims Act. This suit includes a claim for triple damages – because when the state makes a purchase based on a false statement, the defendant is responsible for the amount lost times three.

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Assembly Candidates Confront the Issues:  Howard Terminal , Local Control of Schools, Reparations

The candidates are running to represent Oakland, Alameda and San Leandro in a June 29 special election for California State Assembly District #18, a seat that was previously held by Rob Bonta, who was recently appointed as California Attorney General.

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James Aguilar

Janani Ramachandran

Malia Vella

Mia Bonta

 

Candidates for State Assembly responded to pointed  questions on some of the critical issues facing Oakland schools and the community – including displacement, housing, reparations, public safety and returning full local control to the public schools – at a recent Education Candidate Forum on Zoom hosted by the School of Education at Holy Names University in Oakland, in partnership with the Oakland Post Community Assembly.

The candidates are running to represent Oakland, Alameda and San Leandro in a June 29 special election for California State Assembly District #18, a seat that was previously held by Rob Bonta, who was recently appointed as California Attorney General. Candidates attending the forum were James Aguilar, Victor Aguilar, Mia Bonta, Joel Britton, Janani Ramachandran, and Malia Vella.

The event was hosted by Dr. Kimberly Mayfield, dean of the School of Education at  Holy Names, who emphasized the importance of these issues for the city’s future.

“We have just come through a moral and political crisis (in this country) around racism and the government’s role in maintaining this system. We are looking for a new approach, and this is the lens we will be using today for this education forum,” said  Dr. Mayfield.

Also welcoming the candidates and the public to event were Oakland Post publisher Paul Cobb and his wife Gay Plair Cobb, who highlighted  their intense interest in schools and education. Paul Cobb is a former member of the Oakland Board of Education, and Gay Cobb served for many years on the Alameda County Board of Education.

The first question to  candidates was whether they would oppose the big money coalition of politicians and  powerful interests  behind  Oakland A’s owner John Fisher’s stadium and massive downtown real estate project at Howard Terminal. 

 Opponents of the project  argue  that the A’s proposal is vaguely worded and would come at a  high cost to Oakland taxpayers, who would foot the bill for decades. They say the development would create  a city-within-a-city, like Piedmont, that would  displace local residents and likely wreck  the Port of Oakland and its decent-paying longshore jobs, turning the city’s waterfront  and downtown into a tourist attraction like Pier 39 in San Francisco.

Of the three candidates who are considered to be the top contenders., only Janani Ramachandran was strongly opposed to Fisher’s deal. Malia Vella and Mia Bonta raised concerns but did not oppose the development. 

James Aguilar, Victor Aguilar and Joel  Britton were also against the project.

Bonta, president of the school board in Alameda, said, “I believe that there is a way for us to be able to hold the Oakland A’s accountable to the plan and the processes that they made … starting with stakeholder involvement in the environmental impact of the proposed project.”

Malia Vella,  vice mayor of Alameda and attorney for the Teamsters Union, said, “We need to have community input. The best projects are the results of a robust process that involve community stakeholders,… and an opportunity to meaningfully engage.. to get the best community benefits.”

Said Janani  Ramachandran, a social justice attorney, “I was the first candidate in this race who took an uncompromising, clear and public stand against the project … because having visited Howard Terminal, I have seen why it is entirely unfeasible and harmful to our West Oakland residents and extremely harmful to our thriving port, the fifth largest in the country.”

The candidates supported the statewide demand or reparations and the movement for Reparations for Black Students raised by community groups in Oakland.  They also backed an approach to public safety that deemphasizes policing and stresses the need for jobs, housing and health care to build safe communities. 

Candidates also backed the return of local control of Oakland schools and loan forgiveness, to end the domination of the schools  by a state-imposed trustee and the austerity program pushed by Fiscal Crisis Management and Assistance Team (FCMAT),as well as halting the closing of schools in flatland neighborhoods.

Bonta called for “an end state receivership, which is decades old, and  the FCMAT order that has created a status of fiscal enslavement of Oakland Unified, which paired with growth of charter schools has created a structural deficit that OUSD  can’t get out from under.”

About teacher recruitment, all the candidates said would seek to end expensive standardized tests and other obstacles facing Black and other people of color who want to become teachers.

Janani Ramachandran said she would support legislation  “to remove excess and expensive tests and other barriers that .. keep Black and other potential teachers of color from entering the profession.”

 

To watch the video of the forum, go to www.youtube.com/watch?v=6vsEi_7bXx4

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Legislative Summary from State Senator Nancy Skinner

I invite you to follow me on Twitter @NancySkinnerCA and Facebook and to visit my Senate website for regular updates on the status of my legislation and information on the state budget. It is a pleasure serving you in the state Senate.

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Sen. Nancy Skinner. Photo courtesy of Nancy Skinner.

Here’s a brief summary of the bills I introduced this year that are still moving through the legislative process. All so far were passed by the state Senate and are now on their way to the Assembly:

  • SB 8 Extends Housing Crisis Act of 2019: The Housing Crisis Act helped expedite housing that meets local rules by asking local governments to process permits faster and not change the rules midstream. SB 8 extends the sunset on the Housing Crisis Act until 2030.
  • SB 16 Coming Clean on Police Records: Thanks to my 2018 bill, SB 1421, Californians now have access to a limited set of police misconduct records. SB 16 expands access to records on officers who have engaged in biased or discriminatory behavior, unlawful arrests and searches, and excessive force.
  • SB 65 California Momnibus Act: California’s infant and maternal death rates, especially for families of color, persist at high rates. SB 65 expands pre- and postpartum services, such as doula care and financial support, to reduce death rates and ensures data is collected to understand what’s causing these disparities.
  • SB 65 California Momnibus Act: California’s infant and maternal death rates, especially for families of color, persist at high rates. SB 65 expands pre- and postpartum services, such as doula care and financial support, to reduce death rates and ensures data is collected to understand what’s causing these disparities.
  • SB 81 Judicial Guidelines for Sentencing Enhancements: California has over 160 enhancements that add time to a prison sentence over and above the time required for the crime committed. SB 81 establishes parameters for judges to determine whether a sentence enhancement is needed to help ensure that sentences are the length the judge believes is necessary to protect public safety.
  • SB 262 Bail Reform: I’m a joint author of SB 262 to reform CA’s bail system so no one is kept in jail simply because they can’t afford bail.
  • SB 290 Clarifying CA’s Density Bonus Law: Allows low-income student housing and for-sale low- and moderate-income housing to benefit from California’s Density Bonus law.
  • SB 354 Relative Placement: Reduces barriers that prevent children in foster care from being placed with relatives and extended family.

And great news, the funding to support my bill, SB 364, Free School Meals for All, was included in the Legislature’s budget proposal, which means millions of our K-12 students will get a free meal at school.

I invite you to follow me on Twitter @NancySkinnerCA and Facebook and to visit my Senate website for regular updates on the status of my legislation and information on the state budget. It is a pleasure serving you in the state Senate.

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Holy Names University Celebrates New Teachers Completing Credentials

“I know very deeply what it means to be a teacher at any time but especially this past year. We wanted to do something special, and maybe this is starting a trend, to acknowledge all of  our credential program completers.”

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Holy Names University Website

Holy Names University’s School of Education held a Zoom celebration at the end of the school year on May 28 to recognize eight new teachers who completed their teaching credentials, successfully finishing their rigorous training in the midst of an extremely challenging pandemic year.

The credential completers were honored by Dr. Kimberly Mayfield, dean of the School of Education, who emphasized the humanistic and nurturing approach to teaching that is the hallmark of Holy Names.

Reflecting on the principles that motivate the HNU staff, she said, “We train our candidates to be effective no matter what the setting is. Although this (year’s conditions) were unique, our candidates were expertly prepared for it.”

“I know very deeply what it means to be a teacher at any time but especially this past year. We wanted to do something special, and maybe this is starting a trend, to acknowledge all of  our credential program completers.”

Mayfield explained that education and Oakland schools are a profound part of who she is. She is herself a former Oakland teacher; her mother was an Oakland teacher for many years; and her husband is currently an Oakland teacher.

“My hope and my charge for our candidates is not only to deliver the kind of education you’ve been trained to do but to really be sure that your classrooms are safe places for all students at your school,” Mayfield continued.

“When there are students who seem to be outliers and maybe don’t fit the picture of the school at large, that student fits the picture of success for you as a HNU graduate. Your classrooms become the safe places for all students, not just the students that are in your class or on your (rolls). That is the ethic of care that we’ve imparted.

“We are coming together in love and we want to recognize the good work that our HNU candidates have done.

She said that the Holy Names teachers are exceptional people. “When we do recruitment events, we always say we aren’t just training teachers to be teachers, we’re training teachers to be effective with our own children. When we look at who we want in the program, we are looking for candidates through those eyes. It’s a higher standard. Our relationship with you is forever.”

The eight Holy Names credential completers are:

  • Todd Brewer, who is completing a special education credential. He teaches 8th grade at Impact Academy;

    Todd Brewer

  • Mason Brown, who is completing his single subject in science. He teaches physics for 10th, 11th and 12th graders at East Bay Innovation Academy;

    Mason Brown

  • Angela Calderon, who is completing her special education credential. She has been teaching special education at Richmond High School;

    Angela Calderon

  • Jaron Epstein, who is completing a special education credential. He has been teaching 6th-8th grade in a special day class at West Oakland Middle School;

    Jaron Epstein

  • Alexander Niuatoa, who is earning a single subject physical education credential. He teaches 7th and 8th graders at Winton Middle School and 10th grade at Hayward High School.

    Alexander Niuatoa

  • Erica Nurse, who is receiving her multiple subjects credential. She has been teaching second grade at Tolenas Elementary School in Fairfield and gives private music instruction in Vallejo.

    Erica Nurse

  • Shazmine Randle, who is earning a special education credential. She teaches 6th through 8th graders at Creekside Middle School.

    Shazmine Randle

  • Mariya Snazina is earning a world languages credential. She teaches French at Castro Valley High School.

    Mariya Snazina

Each of the credential completers who attended the celebration will receive a $200 gift card, courtesy of a donation by the Teel Family Foundation, to help them buy supplies for their classrooms for the new school year.

Mayfield ended the ceremony by remembering the legacy of “really great educators who have gone before you: Dr. Fred Ellis, Margie Mayfield and Sylvester Hodges.”

“I want you to know that their energy is with you and supporting you as you go out and do really great work,” she said.

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