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Showing posts with the label Credit Rating Agencies

Hearing on Examing Proposals to Enhance the Regulation of Credit Agnecies(Jui Kai Li)

On Aug 5th, the US Senate Committee on Banking, Housing, and Urban Affairs held a hearing on Proposals to enhance the Regulation of Credit Rating Agencies.

Testifying were Michael S. Barr-U.S. Department of the Treasury, Professor John C. Coffee, Jr.-Columbia University Law School, Dr. Lawrence J. White-New York University ,Mr. Stephen W. Joynt-Fitch Ratings, Mr. James Gellert-Rapid Ratings, Mr. Mark Froeba-PF2 Securities Evaluations, Inc.

The testimony is summarized below and copies of the written statements are available at;
http://banking.senate.gov/public/index.cfm?FuseAction=Hearings.Hearing&Hearing_ID=89e91cf4-71e2-406d-a416-0e391f4f52b0

Credit Rating Agency blamed for Financial Stress

In credit markets, borrowers often know more than lenders. While lenders may buy a portion of debt issued, borrowers often issue debt to many borrowers. Thus, rating agencies are traditionally assumed to address this information asymmetry. They help lenders evaluate the credit worthiness of borro…

SEC to Discuss Rules Governing Credit-Rating Agencies

According to the Washington Post, "The Securities and Exchange Commission is planning to announce Thursday it will hold a roundtable to discuss how to revamp the rules governing credit-rating agencies, according to people familiar with the matter.

This would be the first step toward addressing problems in the industry and the first public policy initiative taken by new SEC Chairman Mary L. Schapiro since she started at the commission.

Schapiro has raised concerns about credit-rating agencies, which are private firms that have been blessed by the SEC to judge the credit-worthiness of securities. Credit-rating firms gave high grades to many of the mortgage-related securities that turned out to be toxic and have wreaked havoc in the financial crisis.

The roundtable is scheduled for April 15. The three major credit- raters, including -- Standard & Poor's, Fitch Ratings and Moody's, -- and others have been invited to speak.

Schapiro has criticized the way credit-rating firms a…

SEC Approves Measures to Strengthen Oversight of Credit Rating Agencies

The SEC today "approved a series of measures to increase transparency and accountability at credit rating agencies, and ensure that firms provide more meaningful ratings and greater disclosure to investors.

The new measures impose additional requirements on credit rating agencies, whose ratings of residential mortgage-backed securities backed by subprime mortgage loans and of collateralized debt obligations linked to subprime loans contributed to the recent turmoil in the credit markets. The SEC also proposed additional measures related to transparency and competition concerning credit rating agencies."

We think these reforms are important first steps, and are mindful of the fact that politics and regulation are the "art of the possible."

As we said in 2005, fradulent practices by credit rating agencies

"threaten the integrity of securities markets. Individuals and market institutions with the power to safeguard the system, including investment analysts and NRSRO…

Credit Agencies grilled on the Hill (Tian Weng)

Members of Congress held the third in a series of hearings on the financial crisis titled “Credit Rating Agencies and the Financial Crisis.” The hearing, held on Wednesday in 2154 Rayburn House Office Building, examined the roles and responsibilities of credit rating agencies in the current financial turmoil. Top credit rating agency executives also testified before the House Committee on Oversight and Government Reform.

In his opening statement, Committee Chairman Henry Waxman briefly outlined the sequence of events which lead to today’s crises. “The story of the credit rating agencies is a story of colossal failure,” Mr. Waxman said. He pointed out that leading credit rating agencies are essential financial gatekeepers. However, the agencies assigned triple-A ratings to securities and CDOs backed by risky subprime mortgage loans. As a result, the entire financial system is now at risk.

The three largest credit rating agencies - Standard & Poor’s, Moody’s, and Fitch Ratings control…