SEC: Credit-Rating Agencies Require More Oversight

Ever notice the guys who crash planes into the sides of mountains don’t get to do the review of what went wrong?

Same thing with other gian calamities: The Captain of the Exxon Valdez didn’t do the crash review; The Challenger Shuttle engineers weren’t the ones who determined it was the O rings, etc. A separate team of experts comes in to objectively review the evidence.

So won’t someone explain to me why we give a rat’s ass what the big 3 ratings agencies think would be a better way to regulate themselves?

“Rating agencies have come under scrutiny over the past year after they gave overly generous ratings to debt — a move which some say exacerbated the financial crisis.

Agencies like Moody’s, Standard & Poor’s and Fitch Ratings have also been criticized for their business model in which issuers of securities pay the firms to rate them. Some believe this creates an inherent conflict of interest. On Wednesday, the heads of those firms and myriad other credit-rating experts gathered at the SEC to discuss what changes, if any, need to be made to improve oversight of the firms.”

Not critics of the horrific state of affairs — btut he companies themselves.

Well, its entertaining to say the least. The commentary from S&P via a white paper is especially HILARIOUS:

“Market participants should be free to choose from a variety of business models for credit-rating agencies, but all firms should try to strengthen their transparency, quality of performance and prevention of conflicts of interest, according to Standard & Poor’s.”

Now, I think that is funny. But they don’t — they are serious:

“In a new white paper, S&P lists six qualities investors want from ratings firms: all public ratings available to all investors without charge at the same time; a ratings process free from conflicts of interest and independent of issuers, investors and governments; ratings based on sound, consistently applied methodologies that consider real-world trends; broad and consistent coverage of a wide range of securities and asset classes; ongoing scrutiny to ensure timely upgrades or downgrades if appropriate; and freedom to choose rating opinions from multiple sources and additional benchmarks on issues besides the likelihood of default.”

These guys should work for HBO — seriously, give them a job doing anything but rating credit.

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Sources:
Schapiro: More Oversight Needed for Credit-Rating Firms
SARAH N. LYNCH
WSJ, APRIL 15, 2009, 3:43 P.M.
http://online.wsj.com/article/SB123980931135221355.html

S&P: Rating Agency Goal Should Be Transparency, Independence
DOW JONES NEWSWIRES, APRIL 10, 2009, 3:52 P.M.
http://online.wsj.com/article/BT-CO-20090410-704685.html

SEC chief: need tighter oversight of rating firms
MARCY GORDON
AP, APRIL 15, 2009
http://www.google.com/hostednews/ap/article/ALeqM5i_mRZNfX8KzLDJwYh1IM0g-jb7FAD97J577G0