Associated Press
By ALAN ZIBEL 08.29.07, 3:34 PM ET
WASHINGTON –
Lawmakers this fall will consider stricter rules for credit-rating agencies amid criticism that they failed to accurately assess – or warn investors about – the risks that mortgage investments posed to financial markets.
The industry dominated by Standard & Poor’s, Moody’s Investors Service and Fitch Ratings could be forced to disclose conflicts of interest, and some say rating agencies should be banned from being paid by debt issuers – a key conflict in the eyes of critics.
It remains unclear, however, whether Congress will aim for a major overhaul of the industry or minor tweaks. Last year President Bush signed a bill designed to encourage the Securities and Exchange Commission to allow more competitors in the field, but Democrats may be inclined to support new regulations rather than trusting the market.
The credit-rating agencies, whose ratings are used by investors to gauge the likelihood of default of mortgage backed bonds and other forms of debt, are subject to oversight by the SEC, which has the power to designate companies as national rating organizations.
In recent weeks, House and Senate lawmakers have said they plan to examine of the three main credit-rating agencies and their role in the mortgage market meltdown.
"It is clear that they told people things that turned out to be inaccurate," Rep. Barney Frank, D.-Mass., chairman of the House Financial Services Committee, said in an interview. Frank’s committee plans to hold hearings, but he declined to describe what kind of actions might be needed, saying that lawmakers need to study the issue first.
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http://www.forbes.com/feeds/ap/2007/08/29/ap4065650.html
