Thursday, May 14, 2009
Rating Agency PCAOB?
"[SEC] Chairman Mary Schapiro said the agency has 'more to do' in regulating credit-rating firms, adding fuel to a debate that includes ideas such as changing the way firms are paid. ... US regulators and lawmakers are considering a range of ideas to get tougher. Many of them focus on changing the system under which the top ratings firms--including Moody's Corp., McGraw-Hill Cos. [S&P] and Fimlac SA's Fitch Ratings--receive fees from the issuers they rate. ... The SEC held a roundtable Wednesday where much of the attention was focused on ways to minimize potential conflicts of interest. ... The so-called issuer-paid model accounts for 98% of ratings. ... A recent 10-month SEC study found that rating firms put profits ahead of quality when determining ratings for mortgage-backed securities. .. Ms. Schapiro said during her confirmation hearing in January she was evaluating the idea of an independent oversight body focused on credit ratings, akin to the Financial Accounting Standards Board, which sets accounting standards", Kara Scannell, at the WSJ, 16 April 2009.
What? The FASB that let Barney Frank (BF) revise SFAS 157? What will the Rating Agency Standards Board (RASB) do if minorities get too few mortgage loans and BF says its standards are "racist"? How will the RASB monitor raters? Will it farm out compliance to the PCAOB? Nothing good will come from the RASB if formed. It will become another political football. Will the PCAOB hire "former" Moody's and S&P managing directors to "inspect" the rating agencies?