Thursday, February 14, 2008

Rating Agency Reform?

"Standard & Poor's Ratings Services plans to announce 27 separate actions it will take in the hopes of bolstering confidence in credit markets and the bond rating firm's analytical integrity, including a tougher oversight of analysts to spot potential conflicts of interest. ... Analysts who leave S&P to work at a bond insurer will have some deals they previously rated reviewed to make sure their objectivity wasn't compromised by the prospect of the new job. ... An auditing or governance expert will also be brought in to publicly review S&P's processes", WSJ, 7 February 2008.

"Andrew Cuomo, New York state's attorney general, wants credit-ratings firms to go further in their efforts to overhaul how they rate mortgage-related bonds, criticizing voluntary changes under way at the firms as 'too little, too late.' ... Cuomo called the moves 'window dressing' that fall short of the systemic change needed to restore investors confidence. S&P and Moody's 'are attempting to make piece-meal change that seem more like public relations window dressing than systemic reform,'' he said", WSJ, 8 February 2008.

I agree with Cuomo. Having seen 31 years of CPA reform, I expect no subtantive changes from the ratings agencies. "An auditing or governance expert". Who? A Big Four CPA firm? Mary Jo White? Arthur Levitt? Give it up S&P.

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