S.E.C. Proposes Tighter Rules for Credit Ratings Companies

New York Times (06/12/08) P. C2
The Securities and Exchange Commission (SEC) has proposed new rules aimed at expanding disclosure in the credit rating industry and flagging the ratings of more complex securities. In doing so, SEC officials are striving to make the ratings business more open while also encouraging new firms to enter. The trio of firms that currently dominate the industry--Standard & Poor’s, Moody’s Investors Service and Fitch Ratings--have come under fire for failing to identify risks in subprime mortgage investments. As home loan delinquencies have increased and the value of those investments has plunged, these three agencies have downgraded thousands of securities backed by mortgages--actions that have, in turn, contributed to billions of dollars in losses and writedowns at major banks and investment firms.