SEC: Yep, We Screwed Up With The Rating Agencies

SEC

Stop the presses. The inspector general of the SEC today recognised the commission had been “slow to act” when it comes to regulating rating agencies

Brief recap: In July of last year, the SEC recognised that they had uncovered “serious shortcomings” at the agencies.”

So it took the SEC more than a year to ponder their own slowness, and this is the conclusion they came up with.

(Let’s remember the emails unveiled a year ago in the SEC report examining the agencies. The one from an analyst to his colleague saying: “Let’s hope we are all wealthy and retired by the time this house of cards falters.” Or that other one from an analyst expressing concern that the firm’s model did not capture “half” of the deal’s risk, but that “it could be structured by cows and we would rate it.”)

So bravo SEC.  But now the more important question is: What are you going to do about it?  So far, although everyone recognises that the rating agencies are a disaster, no one has changed a thing.

Unfortunately, much of the problems with the ratings agencies were actually caused by the SEC’s rules in the first place. They created the legal oligopoly that locked out competition and turned Fitch, S&P and Moody’s from credit analysis companies into pseudo-governmental “agencies.”

So now that the SEC has spent a year concluding that it was slow to act, we look forward to its eventual solution.  Unfortunately, we’re not confident they they’ll come up with a good one.

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