Posted on 04/22/2008 11:36:22 PM PDT by TigerLikesRooster
SEC readies report on credit rating agencies
Stephanie Baum
23 Apr 2008
The US Securities and Exchange Commission will issue a report this summer following an examination of credit rating agencies and their roles in the credit crunch as they prepare new rules governing their behavior.
SEC chairman Christopher Cox told the US Senate Committee on Banking, Housing and Urban Affairs that the focus of the SEC’s research is to determine whether the ratings agencies violated their conflict of interest rules to determine their clients’ credit ratings.
Cox told the committee that the SEC is looking at requiring more transparency for underlying assets of securities.
The agency may also require that all companies have access to underlying data to prevent companies funded by investors from having a competitive disadvantage, he added.
Cox said: “We expect the results of these staff examinations will provide significant and useful new information that will help not only the SEC, but also issuers and users of credit ratings in this country and around the world to address the problems we have seen with ratings of sub-prime related products.”
Cox said 40 SEC staff were involved in examining credit rating agencies. He observed that ratings agencies increased the volume of structured finance deals they evaluated between 2004 and 2006, which grew more complex in line with the underlying securities for the loans.
Lax loan underwriting standards coupled with the rise of credit risk transfer markets to increase risk protection and revenues contributed to the credit crunch, said Cox.
Credit ratings agencies have been working to repair their image following the onset of the credit crunch.
Although they initially gave structured products tied to the sub-prime mortgage market top AAA ratings, they later changed their positive assessments and downgraded them, wiping away their value.
Moody’s Investor Services, Fitch Ratings and Standard & Poor’s are retooling some of their policies in an effort to restore market confidence.
Separately, the Securities Industry and Financial Markets Association has assembled a task force to review credit ratings issues.
Boyce Greer, Fidelity president of fixed income and asset allocation, and Deborah Cunningham, Federated Investors chief investment officer will serve as co-heads of the group.
AllianceBernstein, JP Morgan Chase, Citigroup, Vanguard and Schroders will also take part.
The task force will help advance a dialog between its members and rating agencies, initiated last year. The group will also work with government officials, legislators and regulators
Ping!
I have a rating for all of them = F-
Their grades are so abominable they should be sent to reform school.
Add to this, the fact that the Gubbermint stepped in and helped rescue Bear Stearns, and that the Fed in a complete break with decades of monetary policy opened its Credit Window to non Federally Insured borrowers (ie: investment banks) and assumed the risk for them.
The result: We now have a situation where all these Investment Banks can take all the risks they want, lose all their client's money and investments, and STILL get bailed out by the US Gubbermint, while their fat-cat CEO's exercize millions of dollars of options in their "Golden Parachutes" and screw the U.S. Taxpayer.
Someone explain to me how that's good for Capitalism, the U.S. economy, and the U.S. Taxpayer.
In the meantime, our Gubbermint continues to crash the U.S. currency by lowering interest rates, allowing the dollar to fall against the Euro and Sterling, and creates hyper-inflation in the oil and commodities markets FURTHER damaging American families.
And don't get me going on this whole "biofuels" mess. Anyone with half a brain (which excludes the ENTIRE U.S. Government) knew that burning food for fuel was going to drive the cost of many items right off the dinner table. And in typical Gubbermint fashion, they're all too damn' stupid to see their mistake and un-do a bad law. No No, they'll pass ANOTHER stupid law to try and fix the problem, only to make it worse again!
The point being: Once again, Gubbermint is the problem, and not the solution.
You are way too kind.......
My understanding is that there wasn’t a bailout. The Fed did nothing to rescue Bear. IMO, they acted responsibly to protect the financial infrastructure. They didn’t pour any money into the deal, only a guarantee of $29 billion on already written down assets. The taxpayers have a very good chance of making a profit on this deal.
I agree with your opinion on the crashing of the currency and the ensuing mess.
I’ve always thought it strange how they bundled “risky/bad” paper, and it’s rated AAA.
BTW, I am NOT a fan of Bernanke.
I think you called this months ago update.
Tell me this is all a joke, right? I mean, can you imagine grades given to premeds based upon an agreement that the teacher's would get their pay only if the student got into medical school? Would we have any faith in teachers, or doctors after we discovered a bunch of graduates transplanted buttock in the place of brains, which is about what the financial markets and their rating agencies did? F-?? They should all go to jail for fraud.
When fraud starts clearing $1B, not to say $1T, you have stolen the livelyhood of a lot of people and punishment should be per old standard for horse thieves, except hanging would be too good for these folks and they should do hard time for life with father rapers without possibility of parole.
Geez...could you describe how the government RESCUED Bear Stearns....?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.