State insurers are having a hearing on rating agencies today in Maryland. This is the same hearing Moody’s initially refused to attend, but then swiftly changed its mind once regulators threatened it.
According to sources who attended the meeting, the atmosphere was rough.
In question was the world’s overreliance on the agencies. As we wrote last week, several regulators, including New York State Insurance Department, are looking at alternatives.
New York Insurance Department Deputy Superintendent Hampton Finer, who attended the hearing, told us last week that he had been in talks with several companies about taking over the rating analysis. The companies include BlackRock, PIMCO, Promontory and Risk Metrics. He said all are interested and see it as an “opportunity.”
Moody’s has been increasingly under fire recently and initially refused to attend the hearing, then changed its mind in light of the regulators’ uproar. At the hearing, the company tried to downplay the mess it’s in, saying that, yes, they got it wrong but “we’re not alone. We’re fixing everything,” the source at the hearing tells us.
Moody’s also told the gathering that it has “changed.”
Another source present at the hearing says the regulators should take offence at the fact that none of the senior execs spoke. Some were in attendance, though–such as Michael Kanef, former head of subprime at Moody’s, and now, chief of compliance.
“Which is a joke,” another source in attendance tells us. “He was at the centre at a lot things that went on that were not appropriate, and oversaw some bad behaviour. For him to not speak is even more telling.”
Sean Egan, co-founder and managing director of ratings agency Egan-Jones, tells us that the discussion revolved around finding new sources of ratings. At this point, there are no clear answers that came out of the hearing, as regulators are struggling to find a solution.
But Egan says that changes are underway and we will probably see something within six months.
As for Moody’s, Egan says that he’s not sure “they’re even deemed to be viable at this point, after the inflated ratings issue that came out this week.”