Not always the world's shortest editorial: Why credit-rating-agency speech is sometimes professional speech

Iowa Law Review

Volumn 96, Issue 5, 2011, Pages 1745-1766

  Heggen, Jonathan W ^a  

^a UNIVERSITY OF IOWA COLLEGE OF LAW   (United States)

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EID: 79960787671     PISSN: 00210552     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (134)

1. See ROGER A. ARNOLD, MACROECONOMICS 171 (9th ed. 2010) ("Nearly 9 million more people owned their homes in 2003 than in 1994.").
2. See id. (explaining that the increase in homeownership was "a consequence of the increase in subprime mortgage lending").
3. See Martin Wolk, Feds No Longer Dismiss Talk of Housing Bubble, MSNBC.COM, July 11, 2005, http://www.msnbc.msn.com/id/8514801 (explaining that the increase in home prices was substantial).
4. For example, in California, "the median price for an existing home" increased from $262,000 to $523,000 between 2001 and 2005.
5. See Mary Yanni, Tremors on Wall Street, STAR-LEDGER (Newark, N.J.), Aug. 19, 2007, at 4.
6. Alec Klein & Zachary A. Goldfarb, The Bubble: How Homeowners, Speculators and Wall Street Dealmakers Rode a Wave of Easy Money with Crippling Consequences, WASH. POST, June 15, 2008, at A1.
7. See Vikas Bajaj & Louise Story, Mortgage Crisis Spreads Beyond Subprime Loans, N.Y. TIMES, Feb. 12, 2008, at A1 (explaining that as prices increased dramatically and steadily, the technology boom and the housing boom both "lured people in with seemingly instant and riskfree profits").
8. Quoting "a prominent economist") (internal quotation marks omitted).
9. As one loan officer said afterward, "It was the peak. It was the embodiment of success." "We underestimated the bubble, even though deep down, we knew it couldn't last forever." Id. (internal quotation marks omitted).
10. The Global Housing Boom: In Come the Waves, ECONOMIST, June 18, 2005, at 66, 66.
11. See JOHN R. TALBOTT, THE 86 BIGGEST LIES ON WALL STREET 19 (2009);
12. NOMURA FIXED INCOME RESEARCH, NOMURA SEC. INT'L, INC., CDOs in Plain English (2004) [hereinafter CDOs in Plain English], http://www.vinodkothari.com/ Nomura-cdo-plainenglish.pdf (providing more information on CDOs).
13. For example, Treasury bonds are not backed by any asset; investors purchase them because they believe the United States will not default.
14. At least theoretically, investors could choose how much risk they wanted. In reality, even tranches that were represented as safe investments turned out to be extraordinarily risky.
15. Characterizing the issuer's attempt to turn junk securities into investment-grade securities as "alchemy").
16. Elliot Blair Smith, Bringing Down Wall Street as Ratings Let Loose Subprime Scourge, BLOOMBERG.COM, Sept. 24, 2008, http://www.bloomberg.com/apps/ news?pid=20601109& sid=ah839IWTLP9s.
17. However, in the context of CDOs, CRAs often did much more than just rate tranches. See infra Part II.C (explaining the active role CRAs took in the creation of CDOs).
18. STANDARD & POOR'S, STRUCTURED FINANCE 9 (2007), available at http://www2. standardandpoors.com/spf/pdf/media/082307-ian-op-ed-brt.pdf. The rating itself is merely one to three letters long;
19. For example, for Standard & Poor's, AAA is the highest (representing the safest investments) while D is the lowest (meaning that the CRA believes the borrower will default on most or all of its obligations). CDOs in Plain English. Moody's uses a slightly different scale, but the meaning is analogous.
20. Zachary A. Goldfarb & Alec Klein, The Bubble: How Homeowners' Missed Mortgage Payments Set Off Widespread Problems and Woke up the Fed, WASH. POST, June 16, 2008, at A1.
21. Alec Klein & Zachary A. Goldfarb, The Bubble: How the Housing Bust Started a Panic in Florida, Felled a Storied Bank and Raised the Specter of Recession, WASH. POST, June 17, 2008, at A1.
22. See LAWRENCE ROBERTS, THE GREAT HOUSING BUBBLE: WHY DID HOUSE PRICES FALL? 70 (2008) (arguing that CDOs allowed a large amount of credit "to flow into [the housing] market" and inflate the housing bubble). A combination of "the irrational exuberance of buyers" and the failure of CRAs to properly "evaluate the risk" allowed this problem to occur.
23. CHARLES BROWNELL, SUBPRIME MELTDOWN: FROM U.S. LIQUIDITY CRISIS TO GLOBAL RECESSION 91 (2008) ("There can be no question that some of the burden of blame for the current crisis rests with the credit rating agencies.").
24. Roger Lowenstein, Triple-A Failure, in PANIC: THE STORY OF MODERN FINANCIAL INSANITY 316, 318 (Michael Lewis ed., 2009).
25. See, e.g., Abu Dhabi Commercial Bank v. Morgan Stanley & Co., 651 F. Supp. 2d 155, 163 (S.D.N.Y. 2009);
26. Leslie Wayne, Calpers Sues over Ratings of Securities, N.Y. TIMES, July 15, 2009, at B1 (explaining that the California Public Employees Retirement System sued the big three CRAs-Moody's, Standard & Poor's, and Fitch).
27. See, e.g., Compuware Corp. v. Moody's Investors Servs., Inc., 499 F.3d 520, 525 (6th Cir. 2007) (holding that the First Amendment protected Moody's);
28. Jefferson Cnty. Sch. Dist. v. Moody's Investors Servs., Inc., 175 F.3d 848, 856 (10th Cir. 1999) (holding that the First Amendment protected Moody's against a defamation claim).
29. But see In re Nat'l Century Fin. Enters., 580 F. Supp. 2d 630, 640 (S.D. Ohio 2008) (holding that the First Amendment did not protect Moody's from allegations of fraud and negligent misrepresentation).
30. U.S. CONST. amend. I.
31. See, e.g., In re Pan Am Corp., 161 B.R. 577, 586 (Bankr. S.D.N.Y. 1993) (holding that Standard & Poor's established itself "[a]s a publisher of publicly distributed financial ratings").
32. STAFF OF S. COMM. ON GOVERNMENTAL AFFAIRS, 107TH CONG., FINANCIAL OVERSIGHT OF ENRON: THE SEC AND PRIVATE-SECTOR WATCHDOGS 96 (Comm. Print 2002) (quoting Fitch's general counsel's assessment of the ratings). The phrase "world's shortest editorial" was coined in a law review note.
33. Gregory Husisian, Note, What Standard of Care Should Govern the World's Shortest Editorials?: An Analysis of Bond Rating Agency Liability, 75 CORNELL L. REV. 411, 446 (1990).
34. See Letter from Eugene Volokh, Gary T. Schwartz Professor of Law, UCLA Sch. of Law, to the Subcomm. on Capital Mkts. & Gov't Sponsored Enters. of the House Comm. on Fin. Servs. 1 (May 15, 2009), available at http://house.gov/apps/list/hearing/financialsvcs-dem/ volokh.pdf ("First Amendment law generally provides the media with no special immunity from laws that don't target the media ⋯ . [R]ather, First Amendment law protects speakers and speech." (citation omitted)).
35. However, there is a small exception to this rule as some states have statutes that shield journalists and "do distinguish media defendants from non-media defendants."
36. See Editorial, The Moody's Blues, WALL ST. J., Feb. 15, 2008, at A14 ("An S&P spokesperson tells us, 'We are not auditors; we are not accounting firms." (internal quotation mark omitted)).
37. Brett Gardner, Commentary: Have the Rating Agencies Evolved?, DAILY REC. (Rochester, N.Y.), June 10, 2009, http://www.allbusiness.com/legal/banking-law- bankingfinanceregulation/ 12509820-1.html.
38. See Barbara Kiviat, A Brief History of: Ratings Agencies, TIME, Mar. 30, 2009, at 18, 18, available at http://www.time.com/time/magazine/article/0,9171, 1886559,00.html.
39. At that time, the United States "had a larger private bond market" than most other countries, and investors were hungry for "better information." Richard Sylla, A Historical Primer on the Business of Credit Rating, in RATINGS, RATING AGENCIES, AND THE GLOBAL FINANCIAL SYSTEM 19, 19 (Richard M. Levich et al. eds., 2002).
40. Poor's later became Standard & Poor's.
41. For more information on the history of CRAs, see generally Paul J. Justensen, Ratings Recall: Will New Reform Proposals Make Lasting Impact?, 35 J. CORP. L. 193 (2009).
42. Thomas Friedman quipped, "There are two superpowers in the world today in my opinion. There's the United States and there's Moody's Bond Rating Service." Interview by David Gergen with Thomas Friedman, Columnist, N.Y. Times (Feb. 13, 1996), available at http://www.pbs.org/newshour/gergen/friedman. html.
43. Until recently, there were only three NRSROs-Moody's, Fitch, and Standard & Poor's. U.S. SEC. & EXCH. COMM'N, REPORT ON THE ROLE AND FUNCTION OF CREDIT RATING AGENCIES IN THE OPERATION OF THE SECURITIES MARKETS 5 (2003), available at http://www.sec.gov/news/studies/credratingreport0103.pdf.
44. Currently, there are ten. Theresa Nagy, Note, Credit Rating Agencies and the First Amendment: Applying Constitutional Journalistic Protections to Subprime Mortgage Litigation, 94 MINN. L. REV. 140, 144 n.30 (2009).
45. International: Credit Crisis Hurts Rating Agencies, N.Y. TIMES, Aug. 13, 2007, http://www. nytimes.com/2007/08/13/news/13iht-13oxan-international. 7096549.html.
46. Matthew Richardson & Lawrence J. White, The Rating Agencies: Is Regulation the Answer?, in RESTORING FINANCIAL STABILITY: HOW TO REPAIR A FAILED SYSTEM 101, 102 (Viral V. Acharya & Matthew Richardson eds., 2009) (internal quotation mark omitted).
47. There may have been another factor contributing to the change in business model-people were taking the ratings and "copy[ing] and distribut[ing] [them] without generating revenues for CRAs."
48. ROBERT STOLT, THE ROLE OF RATING AGENCIES IN STRUCTURED FINANCE 5 (2008).
49. Internal quotation mark omitted).
50. See Katie Benner, Fixing the Ratings Game, FORTUNE (Oct. 4, 2007, 3:37 PM), http://money.cnn.com/2007/09/28/news/companies/ratings-agencies.fortune/ index. htm ("Pension funds, banks, money market funds, and insurers can only buy debt rated 'investment grade' by an NRSRO. State and federal laws also regulate bank debt based on NRSRO credit ratings.").
51. See FRANK PARTNOY, COUNCIL OF INSTITUTIONAL INVESTORS, RETHINKING REGULATION OF CREDIT RATING AGENCIES: AN INSTITUTIONAL INVESTOR PERSPECTIVE 4-5 (2009), available at http://www.cii.org/UserFiles/file/CRAWhitePaper04-14-09. pdf.
52. Some think the government should simply get rid of the NRSRO designation. See Editorial, Protecting the Credit Raters: Washington Moves To Maintain the AAA Cartel, WALL ST. J., Oct. 1, 2009, at A22 (making this point and advocating that the market determine the risk of investments).
53. Citing 17 C.F.R. § 230.436(g)(1) (2007)).
54. See Richard Tomlinson & David Evans, CDO Boom Masks Subprime Losses, Abetted by S&P, Moody's, Fitch, BLOOMBERG.COM, May 31, 2007, http://www.bloomberg.com/apps/news?pid= newsarchive&sid=ajs7BqG4-X8I ("When it comes to CDOs, rating companies actually do much more than evaluate them and give them letter grades. The raters play an integral role in putting the CDOs together in the first place.").
55. STANDARD & POOR'S, supra note 18, at 1.
56. Id. (citing Charles Calomiris, a Professor of Financial Institutions at Columbia University).
57. In re Fitch, Inc., 330 F.3d 104, 110 (2d Cir. 2003).
58. STANDARD & POOR'S, supra note 18, at 2.
59. U.S. SEC. & EXCH. COMM'N, SUMMARY REPORT OF ISSUES IDENTIFIED IN THE COMMISSION STAFF'S EXAMINATIONS OF SELECT CREDIT RATING AGENCIES 6 (2008), available at http://www.sec.gov/news/studies/2008/craexamination070808.pdf.
60. Of course, if the pool becomes worthless, then the securities the investors hold become worthless as well.
61. Exactly who has the final say in this process is not clear. According to Professor Calomiris, "The rating agencies run the show ⋯ . This is not a passive process of rating corporate debt. This is a financial engineering business." Id. (internal quotation marks omitted). However, the head of Fitch's structured finance division claims the banks make the final decision.
62. U.S. SEC. & EXCH. COMM'N, supra note 57, at 7.
63. The Moody's Blues, supra note 34.
64. U.S. SEC. & EXCH. COMM'N, supra note 57, at 7.
65. The issuer will also send information regarding credit enhancement, like subordination, over-collateralization, and excess spread, which are measures the issuer takes to decrease the harm "due to defaults of the loans in the pool." Id. at 6 (explaining subordination, over-collateralization, and excess spread).
66. See The Moody's Blues, supra note 34, (questioning CRAs' reliance on "historical mortgage repayment rates [in] a market that was changing so radically").
67. U.S. SEC. & EXCH. COMM'N, supra note 57, at 9.
68. For example, when an RMBS is one of the underlying assets, there is no analysis of the mortgages that comprise it.
69. Citing Kenneth C. Kettering, Securitization and Its Discontents: The Dynamics of Financial Product Development, 29 CARDOZO L. REV. 1553, 1688 (2008)).
70. CRAs have also claimed journalistic privilege and used the First Amendment to quash subpoenas. E.g., In re Pan Am Corp., 161 B.R. 577, 586 (S.D.N.Y. 1993) (holding that Standard & Poor's, "[a]s a publisher of publicly distributed financial ratings," "deserv[ed] ⋯ the full breadth of First Amendment safeguards").
71. See Ben Protess & Lagan Sebert, Under Attack, Credit Raters Turn to the First Amendment, THE HUFFINGTON POST INVESTIGATIVE FUND (Oct. 28, 2009, 5:57 PM), http://huffpostfund. org/stories/2009/10/under-attack-credit-raters-turn- first-amendment-0 (explaining that a review of "congressional testimony ⋯ illustrates how the [CRAs] have repeatedly invoked [the] right to free speech to dodge government regulation").
72. See, e.g., Abu Dhabi Commercial Bank v. Morgan Stanley & Co., 651 F. Supp. 2d 155, 175-76 (S.D.N.Y. 2009) (holding that the actual-malice standard was not applicable to the CRA-defendant);
73. In re Nat'l Century Fin. Enters., 580 F. Supp. 2d 630, 639-40 (S.D. Ohio 2008) (same).
74. New York Times Co. v. Sullivan, 376 U.S. 254, 279-80 (1964).
75. Some of the errors were very minor. For example, the advertisement described one protest and stated that the protesters sang "My Country, 'Tis of Thee" when in fact they sang the national anthem.
76. quoting NAACP v. Button, 371 U.S. 415, 433 (1963) (internal quotation mark omitted).
77. Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749, 758 (1985)
78. quoting First Nat'l Bank of Boston v. Bellotti, 435 U.S. 765, 776 (1978) (internal quotation marks omitted).
79. While the there was no majority, Chief Justice Burger and Justice White each wrote a concurrence in the judgment, both of which were "even more pro-plaintiff" than the plurality. Therefore, five justices supported the plurality's conclusion that "a lower level of First Amendment protection would be provided" for matters of private concern.
80. 472 U.S. at 759-60
81. quoting First Nat'l Bank of Boston, 435 U.S. at 776 (internal quotation mark omitted).
82. quoting Connick v. Myers, 461 U.S. 138, 147-48 (1983) (internal quotation marks omitted).
83. quoting Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 763 (1976) (internal quotation marks omitted).
84. See, e.g., Abu Dhabi Commercial Bank v. Morgan Stanley & Co., 651 F. Supp. 2d 155, 176 (S.D.N.Y. 2009) (proclaiming that when CRAs have "disseminated their ratings to a select group of investors rather than to the public at large," courts do not apply the actual-malice standard);
85. In re Nat'l Century Fin. Enters., 580 F. Supp. 2d 630, 639-40 (S.D. Ohio 2008)
86. stating the same and distinguishing In re Enron Corp., 511 F. Supp. 2d 742, 820 (S.D. Tex. 2005), where the court applied the actual-malice standard because the ratings of Enron were distributed "to the world"
87. quoting In re Enron Corp., 511 F. Supp. 2d at 820 (internal quotation marks omitted)).
88. 580 F. Supp. 2d at 634.
89. (comparing the facts of the case to the limited audience of the report in Dun & Bradstreet). The court added that the CRA would "have a full opportunity after factual discovery to prove that its ratings ⋯ were matters of public concern." Id. at 648.
90. Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749, 762 (1985).
91. In re Enron Corp., 511 F. Supp. 2d 742, 820 (S.D. Tex. 2005).
92. It seems that this would be a matter of public concern because the rating would be available "to the world."
93. While courts sometimes mention this fact, it does not seem to be crucial to the legal analysis. See, e.g., Abu Dhabi Commercial Bank v. Morgan Stanley & Co., 651 F. Supp. 2d 155, 166, 176 (S.D.N.Y. 2009) (noting in the facts that the CRA "worked directly with [the issuer] to structure the Rated Notes in such a way that they could qualify for the Rating Agencies' highest ratings" but only discussing how widely CRAs disseminated the ratings in its First Amendment analysis (footnote analysis));
94. In re Nat'l Century Fin. Enters., 580 F. Supp. 2d at 639-40, 644 (explaining that "rating agencies commonly instruct how the receivables program should be structured" only after dispensing with CRAs' First Amendment defense).
95. For more information on this topic, see generally PARTNOY, (arguing for increased oversight of and accountability by CRAs).
96. See David Segal, Debt-Rating Agencies Avoid Broad Overhaul After Crisis, N.Y. TIMES, Dec. 8, 2009, at A1 (explaining that Congress is hesitating to pass significant CRA reform with the economy still fragile because CRAs "are an essential engine in the country's vast credit factory").
97. This discussion, of course, will also be relevant to any actions that Congress may wish to take. For example, whether Congress could pass and enforce a statute that mandates that CRAs owe investors a fiduciary duty depends partly upon the First Amendment.
98. See ERWIN CHEMERINSKY, CONSTITUTIONAL LAW: PRINCIPLES AND POLICIES 924-25 (3d ed. 2006) ("[T]he Supreme Court never has accepted the view that the First Amendment prohibits all government regulation of expression⋯ . [E]ven for originalists there is little guidance from history or the framers' intent as to the meaning of the First Amendment.").
99. As Professor Smolla wrote, "[N]o clear, consistent vision of what the framers meant by freedom of speech will ever emerge." Id. at 924 (quoting RODNEY A. SMOLLA, SMOLLA AND NIMMER ON FREEDOM OF SPEECH 1-18 (1994)) (internal quotation marks omitted).
100. Of course, which theory a person or court believes is the most compelling may, in some cases, be outcome determinative.
101. Some scholars argue that there is no need to pick a single First Amendment theory. Steven Shiffrin, The First Amendment and Economic Regulation: Away from a General Theory of the First Amendment, 78 NW. U. L. REV. 1212 (1983).
102. Other main theories of free speech are: (1) "to further self-governance"; (2) "to promote autonomy"; and (3) "to foster tolerance.". The first is relevant to furthering the political process, but the speech here is not political. The other two are relevant to individual speakers, but not CRAs.
103. citing JOHN STUART MILL, ON LIBERTY 76 (1859)
104. See MARK F. DOBECK & EUEL ELLIOTT, MONEY 105 (2007) ("Often, an issuer will hire multiple agencies to provide a rating.").
105. See IAN GOLDIN & KENNETH REINERT, GLOBALIZATION FOR DEVELOPMENT: TRADE, FINANCE, AID, MIGRATION, AND POLICY 89 (2007) ("[CRAs] play a vital role in overcoming informational asymmetries in financial markets ⋯ .").
106. Press Release, Office of Governor Chet Culver, Culver, Fitzgerald: I-JOBS Bond Sale Saves Iowa Millions (July 16, 2009), http://replay.waybackmachine. org/20100805004931/ http://www.governor.iowa.gov/news/2009/07/16-1.php (accessed using waybackmachine internet archive)
107. See Press Release, State of Iowa Treasurer's Office, I-Jobs Bond Issue a Huge Success (July 14, 2009), http://readme.readmedia.com/I-Jobs-Bond-Issue-a- HugeSuccess/889389 (explaining that the State had expected to pay 5% but that high demand "drove the interest rate down to 4.31%").
108. This rating is published on the CRA's website and available to the public. For example, by registering at Standard and Poor's website, one can search its ratings for Iowa and find that it rated the I-JOB bonds that are due in 2034 as AA, which is its second-highest rating. Iowa, STANDARD & POOR'S, http://www.standardandpoors.com/home/en/us/ (last visited Mar. 29, 2011) (register and login; follow "Ratings" hyperlink; then search "Iowa"; then follow "Iowa" hyperlink).
109. Arguing that to qualify for a First Amendment defense, "a rating agency must not have been paid to rate the transaction at issue").
110. Arguing that courts should only give First Amendment protection to CRAs when they act like reporters). What is vital to CRAs is not that courts regard them as members of the financial press but that courts do not regard them as financial advisors.
111. Of course, if CRAs are paid for a specific rating, then the First Amendment no longer protects them. See, e.g., Compuware Corp. v. Moody's Investors Servs., Inc., 499 F.3d 520, 534 (6th Cir. 2007) (explaining that if "Moody's [had] agreed to provide a favorable rating" and failed to do so, "presumably," a court may not subject the breach-of-contract action to the actual-malice standard).
112. Nagy argues that CRAs are unlike the financial press because investors view their ratings as "certification[s]" rather than as opinions. Id. at 159 (quoting Frank Partnoy, How and Why Credit Rating Agencies Are Not Like Other Gatekeepers, in FINANCIAL GATEKEEPERS 59, 88 (Yasuyuki Fuchita & Robert E. Litan eds., 2006)) (internal quotation marks omitted).
113. Internal quotation marks omitted).
114. For example, some state laws allow "some pension funds ⋯ to invest only in investment-grade bonds." ROBERT POZEN, TOO BIG TO SAVE? HOW TO FIX THE U.S. FINANCIAL SYSTEM 62 (2010).
115. See Steven G. Gey, Why Should the First Amendment Protect Government Speech When the Government Has Nothing To Say?, 95 IOWA L. REV. 1259 (2010) (arguing that the government should not be allowed to use its power to speak to silence private speech that it could not directly regulate).
116. Describing the Court's requirement that the speech be a matter of public concern in Dun & Bradstreet).
117. Explaining that "[t]he financial standing ⋯ of a large bond issuer" is a matter of public concern).
118. See Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc., 472 U.S. 749, 760-61 (1985) (explaining that only speech that relates to matters of public concern requires the actual-malice standard).
119. See id. at 751, 760 (holding that when only five subscribers received a credit report, and they had signed a confidentiality agreement, the speech was not a matter of public concern). The general rule for CRAs seems to be that the rating does not meet the standard when it is only distributed to a select class of investors.
120. See supra Part II.C (explaining the active role of CRAs in structured finance).
121. Mark Anchor Albert, Rating Wars: The Lawsuit Filed by Calpers May Be Able To Overcome the Rating Agencies' Traditional First Amendment Defense, L.A. LAW., Oct. 2009, at 38, 40.
122. 472 U.S. 181, 231-32 (1985) (White, J., concurring in the result).
123. quoting Thomas v. Collins, 323 U.S. 516, 544 (1945) (Jackson, J., concurring)) (internal quotation marks omitted).
124. Eugune Volokh, Speech as Conduct: Generally Applicable Laws, Illegal Courses of Conduct, "Situation-Altering Utterances," and the Uncharted Zones, 90 CORNELL L. REV. 1277, 1344 (2005) (footnote omitted)
125. quoting Lowe, 472 U.S. at 232 (White, J., concurring in the result)). Professional-client speech is one of the uncharted zones. See id. at 1284 ("[T]he Court has never squarely confronted ⋯ professional advice to clients.").
126. Lowe, 472 U.S. at 232 (White, J., concurring in the result).
127. citing Smith v. Linn, 563 A.2d 123, 125-26 (Pa. Super. Ct. 1989)
128. Aff'd, 587 A.2d 309 (Pa. 1991)). In Smith, the court held that "a diet book publisher couldn't constitutionally be held liable for the death of a reader from complications caused by the diet."
129. See Daniel Halberstam, Commercial Speech, Professional Speech, and the Constitutional Status of Social Institutions, 147 U. PA. L. REV. 771, 843 (1999) (explaining that due to the "special relationship" "between professional and client," the First Amendment does not protect such speech like it does "between strangers ⋯ on the street corner").
130. See Commercial Fin. Servs., Inc. v. Arthur Anderson LLP, 94 P.3d 106, 110 (Okla. Civ. App. 2004) (holding that a CRA was not entitled to a First Amendment defense and could be held liable for negligence when it rated a CDO because the relationship between the issuer and the CRA "[went] beyond a relationship between a journalist and a subject, and [was] more analogous to that of a client and the client's certified public accountant");
131. Arguing that Congress should treat CRAs "the same as banks, accountants, and lawyers");
132. Letter Opinion from David J. Barron, Acting Assistant Attorney General, to the Assistant Sec'y for Fin. Insts., U.S. Dep't of Treasury (Oct. 22, 2009), available at http://www.justice.gov/olc/2009/opinion-letter-treasury.pdf (arguing that when a CRA gives individualized advice, the difference between a CRA and professionals subject to the professional-client-speech doctrine is "a difference of degree rather than of kind").
133. See supra Part II.C (explaining the role of CRAs in the creation of CDOs).
134. See Alan Howard, The Constitutionality of Deceptive Speech Regulations: Replacing the Commercial Speech Doctrine with a Tort-Based Relational Framework, 41 CASE W. RES. L. REV. 1093, 1159-60 (1991) (explaining that courts treat negligent, professional speech "identically to any other negligent professional conduct"). Of course, if Congress is worried about chilling CRAs' speech when they act as financial advisors, it could mandate a standard somewhere between negligence and actual malice.