Rating the Rating Agencies

Rating the Rating Agencies - 4/14/2009

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HEADLINE NEWS:

Rating the Rating Agencies, Hoping To Improve The Oversight Of The Industry, Regulators Are Likely To Address Issues Of Competition And The Way Many Leading Firms Do Business.
David Ellis

CNNMoney.com. April 14, 2009
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EXCERPT: Just when their missteps in the ongoing financial crisis appeared to have faded, credit rating agencies are finding themselves back in the spotlight once again.On Wednesday a mix of academics, investor groups and top executives from the nation's leading three rating agencies - Moody's (MCO), Fitch Ratings and McGraw Hill's (MHP, Fortune 500) Standard & Poor's - will rendezvous in Washington as part of a Securities and Exchange Commission-sponsored roundtable discussion about oversight of the embattled industry.The meeting will mark the latest efforts by regulators to keep a closer eye on a business that has been widely blamed for contributing to the ongoing financial crisis. Critics have maintained that many of the rating agencies were slow to lower the debt ratings for troubled financial firms and warn of the risks of bonds and other securities tied to subprime mortgages. The rating agencies themselves have already responded to some of the criticism. Some have overhauled their rating models, others have even gone so far as to add warning labels to many of the toxic securities that resulted in billions of dollars of losses for investors.Regulators have been pushing through changes as well. In December, the SEC detailed a set of new rules that would limit, among other things, rating agencies from grading securities in instances where they made recommendations to the issuer or a bank that underwrote the security.But many have argued that regulators have not gone far enough to fix the industry. They add that faster and more sweeping reforms are needed.'Incremental changes unfortunately have not worked,' said Jim Kaitz, president and CEO of the Association for Financial Professionals. Kaitz is among those speaking at Wednesday's hearing and whose organization represents more than 16,000 finance professionals.

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