Janet Tavakoli is taking aim at rating agencies today at the IMF–explaining why they should be stripped from their NRSRO designation for structured products.
The agencies seem to be losing ground fast. Talking to The Business Insider last week, New York Insurance Department Deputy Superintendent Hampton Finer told us that there needs to be an end to the over reliance on them. He said the department, along with others, had been in talks with several investment companies to create alternatives to Fitch, Moody’s and S&P. The companies include BlackRock, PIMCO, Promontory and Risk Metrics, he said, who all are interested and see it as an “opportunity.”
For the agencies’ perspective, this could be the end of a highly profitable oligopoly.
And then, Moody’s said it woulf not appear at a regulatory hearing this week, which angered Finer who said he, and other regulators, would consider stripping the ratings agency of its status as an acceptable ratings agency for use by insurance companies. Unforunately, this probably won’t happen because Moody’s has now agreed to attend the meeting.
Tavakoli says that in addition to their failure to rate structured products, the “opinion” argument they’ve been using is pure nonsense.
Regulators rely on this pseudo-authority so much that they have enacted capital rules for banks based on ratings. If the FDA repeatedly approved tainted meat that sickened people, we would demand a top to bottom overhaul of the organisation and its methods. Since the rating agencies issued ratings that contributed to massive damage to our economy, we should strip them of their NRSRO designation and demand a complete overhaul of their flawed procedures and methodologies.
It seems as if people are finally getting sick of their oligopoly and that some real change could actually happen.
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