Reminiscing about the good ‘ole days, former Attorney General, Governor of New York and CNN host, Eliot Spitzer spoke with the New York Observer Thursday about what he would do to the ratings agencies today.
This has become a particularly salient topic given the downgrade of US credit by S&P, as well as the DOJ investigation into the firm.
If he had his way, Spitzer said he would do to them what he did to others on Wall Street back in the days.
Specifically, he would go through the emails.
“All you need is a common law fraud concept that people—and you go back to the emails, just as we did in the analyst case—and again, I’m not saying “let’s relive the past” This is a more theoretical matter. Go through the emails, and you would’ve seen—”this isn’t a triple-A, but they’re a good client, and we’re gonna…”—that tension between what ratings were put on a product, and one’s belief or recognition that they may not deserve it. There are many theories about what would be there, but you have to get the evidence, to state the obvious. I don’t want to say “gee, they should’ve been prosecuted.” But there should’ve been greater scrutiny over the years, and the structure has always been problematic. It was next on our hit parade, if I had been there for that.”
Here’s how he’d fix the whole system.
The best answer—and I think the marketplace is moving to this—is to essentially tell the ratings agencies: “You’ve got to earn your credibility.” Let’s remove from them the position they had for many years, which was the government saying “You are designated as agencies to which we ascribe a certain elevated position. And you have been given this power by the government without having earned it.” There’s no reason for that. And now I’m going to sound like a freemarketeer.