|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
SEC To Consider Tighter Regulations On Rating Agencies
Alan Zibel - The Associated Press
BusinessWeek. April 22, 2008
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EXCERPT: The Securities and Exchange Commission is considering new rules to limit conflicts of interest in the credit rating industry, a key financial player under scrutiny for not sounding the alarm about risky mortgage investments soon enough. SEC Chairman Christopher Cox said at a Tuesday hearing of the Senate Banking Committee that the government may soon create rules to ban credit rating agencies from doing consulting work for issuers of debt. The regulations haven't been developed yet, but Cox told lawmakers that he saw no reason why such work "could not be prohibited." The industry, dominated by Standard & Poor's, Moody's Investors Service and Fitch Ratings, has been roundly criticized for failing to accurately assess -- and warn investors about -- the risks that mortgage investments posed to financial markets. The credit crisis has led to more than $200 billion in write-downs taken by banks and financial firms over the last year. Critics say the agencies are vulnerable to conflicts of interest because they are paid by the companies whose bonds they rate. In response, agencies say they are strengthening protections against conflicts. For example, S&P says it is establishing an ombudsman's office. However, only Fitch sent its chief executive to the hearing, which irked several lawmakers. The other two sent less-senior executives to Capitol Hill. Senators suggested Tuesday that the government should suspend credit rating agencies' government licenses if they consistently give ratings that turn out to be inaccurate. |
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