Rating Agencies Spared In Obama Financial Reforms

NEW YORK (Reuters) - Long attacked for awarding pristine ratings to mortgages and other securities that proved worthless, credit rating agencies were essentially spared in the Obama administration's financial regulation overhaul.

The plan urges Moody's Corp's Moody's Investors Service, McGraw-Hill Cos Inc' Standard & Poor's and Fimalac SA's Fitch Ratings and others to bolster the integrity of their ratings, especially in structured finance.

Read the whole story: Reuters

Comments

[Brezzydee]

09:01 PM on 06/17/2009

I don't think they are finished yet. This is just the beginning. I think within the next year or so all the agencies will be restructured.

[Lilith33]

07:55 PM on 06/17/2009

If it werent for the AAA and AA ratings these banks couldnt have gotten away with their fraud.so its nice to know the game is still giong on no?

[zukervati]

07:28 PM on 06/17/2009

How else do you keep the charade going!

[nopilikia]

06:19 PM on 06/17/2009

Village of idiots if they let this go unchecked.

[texanna]

06:06 PM on 06/17/2009

Well, the Bankster Boys (Geithner and Summers) have delivered, haven't they? The ratings agencies are at the nexus of the derivatives market problems and now there is nothing to keep them from going right back into business. Lots of money still to be made in the derivatives market, I hear, and now the banksters can get right to scooping it up. Thanks, Pres Obama.

[BurtonOerney]

06:16 PM on 06/17/2009

The nexus of the market, eh? Wow. I don't know where you're hearing that there's plenty of money in derivatives but from what I hear, conflicts of interest have existed between ratings agencies and investors forever and were exacerbated after enron with the use requirement. We rushed into regulation (pitch forks, angry, regular folks, etc) after enron and got mark-to-maket and manditory ratings agency use. That didn't work out too well. Because everybody had to use them, the agencies became the only game in town and there was no requirement to disclose their methods. I know for sure that analysts at Vanguard wouldn't have used the ratings if the methods were disclosed.

But you know, a post is always successful if you get to say bankster.

[texanna]

06:37 PM on 06/17/2009

Alright, I'll leave out the "B" word, but I still maintain that the ratings agencies were at the heart of the derivative market problems. Without their AAA ratings, existing regulations on the investment banks would've made it illegal for them to trade in those derivatives. Given that the ratings are needed AND that there are no regulations on them even now, well, doesn't that pretty much support my comment? As to my assertion about money still to be made, there was a post on HuffPo just the other day that made that exact point using quotes from inside the finance industry sources.

[zukervati]

07:29 PM on 06/17/2009

Right on, the true "axis of evil".

[SammyD]

05:59 PM on 06/17/2009

This had to be a TurboTax Timmy recommendation. Who else could be so absolutely stupid?

[BurtonOerney]

06:18 PM on 06/17/2009

Instead of taking up space with a comment like this, it might be better for everybody if you just thought it to yourself.

[jsgaetano]

05:50 PM on 06/17/2009

We need to get the ratings agencies out of the ratings business.

And to be honest, they really don't want all the responsibility they have in the financial market place. There are laws stating that only no-risk investments can be used for specific purposes... meaning the ratings agencies are the ones who say which investments are or are not legal to be invested in.

As always, having private companies manage governmental authority is a recipe for disaster. In all matters, doing the complete opposite of what conservatives recommend is the best course.

[Hailmaryyy]

05:48 PM on 06/17/2009

The ratings agencies are the enablers of the entire financial crisis. With proper ratings the entire subprime debacle never would have happened.

The entire credit system needs to be re-imagined. So far Washington D.C. has failed to come up with solutions too ease access to credit for businesses and consumers.

http://www.escapethenewgreatdepression.com

[BurtonOerney]

06:08 PM on 06/17/2009

I think $15 billion to the secondary credit market in small business loan risk reductions, including almost a billion to get rid of fees.

[BurtonOerney]

06:08 PM on 06/17/2009

...is good, I guess. Forgot to finish what I was saying there.

[MakeAWish]

05:46 PM on 06/17/2009

And the asleep at the wheel Federal Reserve "BANKS" with far reaching (global) political and financial powers, gets even MORE powerful! Who is overseeing this private, gigantic non governmental institution?

[woundedduck]

05:25 PM on 06/17/2009

...and Obama continues to disappoint.

[Diana]

05:50 PM on 06/17/2009

Indeed. The legacy of the ratings agencies is their deliberate overrating any number of products and corporations. The fact that this wasn't even addressed is this 'overhaul' is stunning, though not surprising. It's simply, obviously, the continuation of corruption.

[BurtonOerney]

06:09 PM on 06/17/2009

HYPERBOLEEEEEE!

[bayviking]

05:19 PM on 06/17/2009

In keeping with Republocrat policy, the entire criminal enterprize, otherwise known as the financial sector, has been spared. What else is new?

[BurtonOerney]

05:17 PM on 06/17/2009

"It should also be made clear to professional investors that it is not a defense or a sufficient discharge of their fiduciary duties to rely on credit ratings when assembling portfolios."

That's right there at the end of the article. People think these agencies are the only way to determine the value of a stock, bond or security. They are not. In fact, I listened to a Vanguard analyst on the Planet Money podcast talking about trying for months to get Moodys to disclose their method for rating securities. She could not get a straight answer but her bosses did not listen to her concerns. Now the method has to be disclosed. If it's not a good method - only using mortgage default data from years when housing prices increased, for example - investment groups who use the rating anyway can be sued.

[OneTop]

05:14 PM on 06/17/2009

I just love how the Public Accounting Industry gets a free pass in all of this.

They are supposed to and in fact do provide attestations that the Financial Statements of these Public Companies are not materially misstated.

Of course they relied [100%] on the rating agencies, who were paid by the owners of the financial instruments (no independence issue there ?)

The aicpa should be ashamed of themselves.

[BurtonOerney]

05:28 PM on 06/17/2009

I don't think they're getting a free pass but you're right. Public accountants are responsible for determining the value of an asset on a balance sheet, not a ratings agency. I think because of the scrutiny accountants got after enron and the failure of any of those new regulations to do what they were supposed to do - protect naive investors - we'll see a long period of transparency efforts and hopefully a shift toward making the public companies themselves responsible for valuing their assets.

[OneTop]

07:13 PM on 06/17/2009

Burton
Ultimately the Financial Statements are the responsibility of management. The Public Accountants are in theory, responsible for attesting to the fact that those Financial Statements are free of Material misstatement.

Without doubt, the rating agencies and the management of these companies are complicit in all of this.

That being said, I still do not see where the obvious shortcomings of the Public Auditors are highlighted.

BTW, I'm a CPA

[diffrntdrummr]

05:13 PM on 06/17/2009

There is no reform without including the rating agencies. Period.This isn't reform,it's just more smoke and mirrors.

[BurtonOerney]

05:21 PM on 06/17/2009

Public disclosure of methods. That's a change. Now you can rate your holdings yourself instead of trying to legislate that the people who do the ratings have to always be trustworthy. You can hire a firm you like to do the ratings.

[jinsei]

05:28 PM on 06/17/2009

Unfortunately it's been characterized by a free speech issue after the NRSRO's (Moody's, S&P, and Fitch) claimed that their ratings were merely "opinions." Courts have been steadfast on this one. For the same reasons, the SEC does not require method disclosure. Irrespective of the methods used, the categories are not differentiated enough to reveal any substantial info that investors could safely rely on anyway.

[lmthp]

05:11 PM on 06/17/2009

"But the blueprint does nothing to address what critics call the industry's key shortcoming: That the biggest agencies are paid by issuers whose securities they rate, creating an incentive to win more business by assigning high ratings."

The same agencies that gave triple AAA ratings to the junk that helped create this financial meltdown remain unregulated. Just great, more change we can't believe in.