Ratings Agencies Skewered Again In SEC Report

According to a recent SEC report, major ratings agencies have not corrected shortcomings in their business models – the very shortcomings, writes New York Times business writer Gretchen Morgenson, that were instrumental in bringing on the 2008 financial crisis. The SEC report did not name names in its listing of problems, although it did allude to “larger” agencies,” which  Morgenson notes would need to refer to the three biggest: Fitch Ratings, Moody’s or Standard & Poor’s. The agencies’ role in the 2008 crash was spoon-fed for a large audience in the recent film, “The Big Short,” by way of a memorable scene which Morgenson replays again in this critique: The Standard & Poor’s functionary, fending off one of the movie’s protagonists, explains that if her employer gave the junk mortgage bonds in question the dismal ratings they deserved, the client would simply take its business to Moody’s. The SEC’s recent report is from its Office of Credit Ratings, but any action taken would need to come from the enforcement staff. An attorney for the Consumer Federation of America says there are “legitimate concerns about the S.E.C.’s willingness to go that route.”