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...What has been left out of the news reports about the strong-arming of Lewis is whether it was ethical. It may have been the only approach to take in Paulson and Bernanke's views. The SEC may claim that the action was not legal because Lewis had an obligation to disclose the conversation to both his board and to his shareholders. He was being asked to act against the interests of the bank he runs in the name of the national interest...
...more fruitful discussion between the public and private sectors—policymakers and rating agencies—about how to better design the process of rating securities and minimize conflicts of interest. “The status quo isn’t good enough,” said SEC Chairwoman Mary Schapiro at a roundtable discussion on the subject last week. While some problems with rating agencies are indeed structural, there are more basic issues of risk-taking behavior at stake that cannot be changed simply through regulation, cooperation, or incentives...
Thousands have since been downgraded. "We need to consider alternatives to the issuer-pay model," SEC commissioner Elisse Walter said in a speech in March. One idea: level the playing field so that new competitors, like smaller agencies that charge investors instead of issuers, can better compete. Another option: a tax on investors, issuers or even the public at large in order to create a central pool of money with which to buy ratings to be made public. (See the best business deals...
...years, the judgment of ratings agencies has become enshrined in countless laws and private contracts; ratings are a key yardstick in how state and federal regulators determine the safety of banks, insurance companies, money-market mutual funds and other parts of the financial system. Over the summer, the SEC proposed some rules that would start the reform movement at home, undoing the agency's own dependence on the ratings agencies. (Read "A Brief History Of: Ratings Agencies...
Those proposed rules didn't make the final December cut, but certain SEC commissioners want to revisit the issue. In a February speech, commissioner Kathleen Casey said it was imperative to address "the oligopoly in the rating industry" and overreliance on ratings in the SEC's rules. "These requirements - which accord privileged status only to ratings from certain firms - have served to elevate ... ratings to a status that does not reflect the actual purpose, much less the limitations, of credit ratings," she said...