One of my Pet Peeves: The Payola business models at Moody’s Investors Services, Standard & Poor’s and Fitch Ratings – meaning the debt securities underwriters pay them for ratings — is unchanged in Obama’s Treasury Department reforms. All they want is some more disclosures and a few restrictions.
A certain Congressman is now convinced these measures are inadequate; Here is the FT:
Credit rating agencies would face a raft of new disclosure rules and restrictions but would not be forced to overhaul their business models under proposed US legislation sent to Congress on Tuesday.
The plan by the US Treasury is aimed at reducing conflicts of interest at rating agencies, boosting the regulatory authority of the US Securities and Exchange Commission over the agencies and reducing the financial system’s reliance on credit ratings.
But critics said the plan, an element of the Obama administration’s broader financial regulatory blueprint, fell far short of what was needed. The proponents of an overhaul of ratings agencies charge that they overlooked the risks of investing in complex, “structured” securities linked to risky mortgages, many of which carried triple A stamps of approval.
Barney Frank, head of the chairman of the House financial services committee, on Tuesday endorsed measures that would overturn requirements that require the use of the credit ratings agencies.
“There are a lot of statutory mandates that people have to rely on credit rating agencies. They’re going to all be repealed,” he told Reuters. (emphasis added)
Barney Frank vs Geithner & Summers. Let’s hope BF is tougher than he looks . . .
Originally published at The Big Picture and reproduced here with the author’s permission.
3 Responses to “Ratings Agency Showdown: Treasury vs Barney Frank”
I do not think you turn to one of the people who had some responsibility in the housing buble as the light for reform. I wonder why BF still has a job!!
Well Guest, we have NO allies so to speak. Yeah, BF is corrupt as hell and treacherous but maybe a criminal can do one decent thing (yes, I’ll believe it when I see it) Maybe even the FASB will regain some guts-I can’t believe I used to be an accountant and thought we were a straight bunch-OMGOMGOMG!George HarterBaghdadontheHudson[HOME OF GSATAN}
It’s the existing structure that allows rating agencies to accept money from the organizations they rate that’s corrupt, and it’s Geithner/Summers who are defending the status quo. If anyone should go, it is they, to be replaced by Bob Reich, Paul Krugman, Alice Rivlan and others who will support real reform. Hard not to be cynical, watching the watered-down measures that are put forward as reform.