Lawmakers turn to credit raters, prepare overhaul

[TomCADem]

Source: Associated Press

WASHINGTON (AP) -- Lawmakers rewriting financial regulations took aim Friday at credit rating agencies, whose analysts often gave safe ratings to risky investments that fueled the financial crisis.

Sen. Carl Levin, D-Mich., said the Senate's regulatory overhaul should go further to curb the industry's inherent conflicts of interest: The agencies are paid by the banks whose investments they rate. Banks generally want higher ratings to make the securities they offer more attractive to investors.

At a hearing Levin chaired Friday, former executives acknowledged that competition within the industry often led the agencies' analysts to rate high-risk securities as safe.

Levin suggested the co-dependent relationship between the agencies and the banks is a dangerous flaw in the financial system. He offered an analogy: "It's like one of the parties in court paying the judge's salary."


Read more: http://finance.yahoo.com/news/Lawmakers-turn-to-credit-apf-331555961.html?x=0

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Cue the Republican complaints about Democrats not being bi-partisan, which is code for water down the bill, not strengthen it.

[AllentownJake]

1. Better be careful

The US government really doesn't want Moodys or S&P seriously doing an evaluation of US Sovereign, State, or Municipal debt or the debt of the G20.

[dotymed]

4. While they're at it

why don't they make the practice of pre-employment credit ratings illegal? In our economy, (even in a good economy) this is a definite violation of our civil rights. You can only get a "decent" job if you have good credit. This is insane... How many home repo's and medical bankruptcies have our citizens experienced. That also ensures that mainly young people can qualify for these few jobs. They haven't incurred un payable medical debts....
America has the most unequal distribution of wealth of ANY COUNTRY IN THE WORLD. That is an indisputable fact. If we (80% that own 3% of the wealth) do not unite our political strength (votes), we don't have a chance.

[Ghost Dog]

2. Ecofin ministers want ECB to create a European “rating agency”

04 de Marzo de 2010 08:00:27 CET The finance ministers from European Union want the European Central Bank to create its own ‘rating agency’, according to an exclusive report in the German business newpaper “Handelsblatt”. Quoting sources in circles of the EU’s finance ministers, the newspaper says that this move aims at decreasing the dependency of the Eurozone on the three rating agencies, Moody’s, Standar&Poor’s and Fitch. Sovereign credit rating has been put increasingly into the spotlight as public finances suffered as a result of the economic crisis due to ‘bail-outs’ and government stimulus measures. Consequently, sovereign credit downgrades could affect a country’s ability to service its debt as investors’ demand higher yields on government bonds.

/.. http://www.eurotribune.eu/?p=6923&l=0&idioma=2

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See also EU Commission on ratings agencies: http://ec.europa.eu/internal_market/securities/agencies/index_en.htm

[cornermouse]

3. Just a thought....

They might start by hiring auditors and enforcing laws and oversights that were in place before Dumbya the Destroyer moved to D.C.

By the way, Moyers' guest last night says Wall Street is already back to breaking rules. We need oversight at least as much as,if not more than, overhaul.

http://www.pbs.org/moyers/journal/04232010/watch.html

[AllentownJake]

5. What a concept

I'm all up for that, I'm an unemployed auditor with a chip on my shoulder.

[cornermouse]

9. Jake, if I was in a position to hire you

I would, absolutely.

[AllentownJake]

10. Well

I wouldn't spend all day looking at porn, financial shenanigans are my porn.

[defendandprotect]

8. We need stronger "people's" government and less corporate government -- less bribery!!

[plantwomyn]

6. I think reforming this practice is essential

Why not set up a fund that the bankers all pool fees to pay the ratings companies. Every time they have a rating done they put more money in the fund for their next rating. The interest the fund accumulates goes to run the fund. No picking your rating agency. All of the agencies go on a list and the next one in line gets the job. The banks won't know who's next on the list. I got this idea from how police departments use a list of towing companies.

[defendandprotect]

7. Watched a wee bit of this hearing the other day ...

rubber stamping AAA --