Turning Up The Heat On Ratings Agencies
So let's recap the first panel that Rep. Henry Waxman's (D-Calif.) House oversight committee just wrapped in its first session on credit-ratings agencies, because this is a complex issue.
Investors depend on credit-ratings agencies, such as Moody's and Standard & Poor's, for accurate ratings on the credit-worthiness of everything from bonds to securities.
Let's be clear here: Waxman thinks the system let down investors by giving high ratings to bad securities because the credit-ratings agencies are driven by fees and profit, rather than commitment to truth.
The first panel was the Good Guys -- two former executives from Moody's and S&P who testified that their former employers were off-track and the current head of a tiny rival of the big agencies who dumped all over his competitors. The committee was happy to hear from these three men, as they provided ammunition for the afternoon session, which will start shortly.
The first panel said that the Big Three ratings agencies -- Moody's, S&P and Fitch -- were "pitched" by issuers of securities to rate them favorably and, at times, "drank the Kool-Aid," an expression that should require no definition even though Rep. Dennis Kucinich (D-Ohio) felt compelled to provide one from a dictionary of slang.
That second panel is scheduled to include Deven Sharma, president of Standard & Poor’s; Raymond W. McDaniel, chairman of Moody’s; and Stephen Joynt, president of Fitch.
It should provide some fireworks. Let's see if Waxman produces more documents.
-- Frank Ahrens
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