Calpers, the largest US public pension fund, is suing three of the largest credit rating agencies for the grades they gave securities, which later suffered massive subprime mortgage losses.

The California Public Employees' Retirement System (Calpers) said in a lawsuit filed last week in California Superior Court, San Fransico that it incurred losses of more than $1 billion from structured investment vehicles (SIVs) that were highly rated by Moody's Investors Service Inc, Standard & Poor's and Fitch Inc.

SIVs are complex packages of loans and debt that include sub prime mortgages and collateralised debt obligations. Investment banks pool the packages and then issue debt to investors.

Credit rating agencies which gave these securities their highest ratings made negligent respresentations to the pension fund according to Calpers. The ratings which the securities received are usually given to investments with almost no risk of loss. This was not the case with the securities, as the ratings proved to be wildly inaccurate and unreasonably high.

The lawsuit from Calpers comes at a time when the ratings agencies have taken much flak for their role in assigning top ratings to investments that ultimately proved highly risky.

Triple-A ratings are also being blamed for the deluge of mortgage-backed securities and other structured debt investments that have caused much havoc on Wall Street for nearly three years.