This article I wrote on credit rating agencies a few years ago left me scratching my head.
Yes, the credit rating agencies had missed Enron and Worldcom — badly. And, on the face of it, they have a huge conflict of interest: They're paid by the companies they rate. But no one could point to anything particular that they had done wrong. The late Leo O'Neill, president of S&P, told CFO at the time that "[There's] no smoking gun."
And the SEC seemed as confused as I was. "Even the SEC doesn't seem to know exactly what problem it is trying to fix," I wrote at the time.
Fast forward three years, and I'm still a little confused, although for different reasons. If the bill that passed the House today becomes law, it will certainly shake up the industry.
But it's hard to get your bearings in this debate. I was surprised to realize that the AFP — which has doggedly kept this issue going for the past three years — has actually recommended much of the criteria for the House bill. And the AFP, of course, is made up of treasurers, who, presumably, are the very individuals that the rating agencies are supposed to be keeping honest. And I don't know what to make of the SEC's proposed new registration role — seems like a form of deregulation, though the very same role was viewed as oppressive regulation when applied to hedge funds.
And as if I weren't confused enough, S&P has invoked its Constitutional protections as a member of the financial press.
That's a topic for another blog. But as a general rule, we in the press hate to be at the center of a story. |
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