Treasury Select Committee Drills Head Honcho’s of Credit Ratings Agencies

Top Management from Moody’s and Standard & Poor’s stopped short of saying sorry for the losses suffered by speculators after they did not spot the problems brewing in the USA sub-prime mortgage market during questioning by the Treasury Select Panel . Frederic Drevon, of Moody’s Services, would only say the company “was not satisfied” with its ratings on financial instruments connected with the US mortgage market.

Dominic Crawley, Standard & Poor’s head of monetary services ratings, asserted the company had “expressed regret” that its research and rating on US sub-prime didn’t mirror what at last occurred in the market.

Paul Taylor, group CEO of Fitch Ratings declared that as far as structured finance transactions were concerned “we have apologized”.

Andrew Tyrie, boss of the Treasury Select Committee, claimed it was “deeply concerning” that Moody’s and. Standard & Poor’s didn’t feel that they had anything to say sorry for. In the session, in which witnesses faced an antagonistic line of querying from MPs, the agencies appeared to wish to play down their role and stressed that stockholders should base their calls on a variety of views and info, and not just those of the ratings agencies.

They claim that there ratings are only one piece of vital info which is available to the market and investors, but there are several other pieces of important info around about credit call making,” Mr Crawley expounded. “We have been clear that we don’t expect an individual financier, or at the other end of the range a complex asset chief, to depend only on what we provide.”

Mr Taylor stated that though ratings were a good evaluation of long term credit suitability, there wasn’t any guarantee that agencies wouldn’t miss things in future times.

“If you are telling me that I need to forecast each default that comes up, with 100% precision, then that is impossible.”.

Mr Tyrie made it obvious he was disenchanted with the result of the session in his concluding remarks, and declared issues including competition in the sector, regulation and the fees and services offer and would explored these further.

He stated: “It appears that you have left the council unconvinced that many of the issues attached to rating agencies in 2008 have yet been adequately addressed.”.

Following the session Mr Tyrie added: “If even one of the ratings agencies had drilled down more deeply into the depth of products developed [in the run-up to the crisis] and challenged them, we’d all be in a miles better place now.”. 

2 thoughts on “Treasury Select Committee Drills Head Honcho’s of Credit Ratings Agencies”

  1. These guys (the credit rating agencies) talk out of both sides of their mouths. They sell their ratings for thousands (and many buyers are actually required by law to invest only in rated debt), yet they accept no responsibility for the accuracy of their ratings.

    Bottom line – the credit rating agencies exists only for themselves and as a great way for investment professionals to subrogate their responsibilities to someone else in order to cover their own asses.

    1. Mike, I agree, they want to say they have no responsibility but they sold a service, a warranty and a guarantee.. by placing their ratings on the investment vehicles they were able to be sold in the markets.
      They are first and foremost a business making huge profits.

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