The more things change, the more they stay the same. The New York Times wrote a story in response to yesterday's Congressional hearings on credit-rating agencies. Read the story from the Times and then read the story from 2006 that I have included as well (see below). I thought Congress was already well aware that these ratings companies were conflicted. No? Be the judge. Read both stories (the New York Times story from yesterday) and then read the CFO.com story from 2006.
From the New York Times (hat tip to Josh): Credit Rating Agency Heads Grilled by Lawmakers (link here)
“The story of the credit rating agencies is a story of colossal failure,” Mr. Waxman said. “The credit rating agencies occupy a special place in our financial markets. Millions of investors rely on them for independent, objective assessments. The rating agencies broke this bond of trust, and federal regulators ignored the warning signs and did nothing to protect the public.”
If Mr. Waxman is right, then what was the Credit Rating Agency Reform Act of 2006? I thought that was designed to stop the abusive practices that had been running rampant in the credit-rating industry.
Read this CFO.com story from 2006 and tell me if this sounds familiar: Bush Signs Rating Agency Reform Act (link here):
"The dominant rating agencies failed millions of investors by neglecting to lower their ratings on Enron, WorldCom and other companies headed for bankruptcy," said Alabama Republican Senator Richard Shelby, chairman of the Senate Banking Committee and sponsor of the legislation, after the bill was signed. "The absence of timely downgrades in these cases was a product of an industry that was beset by conflicts of interest and a lack of competition .... Ultimately, this compromised the integrity of the market and investors paid the price," he concluded.