Chairman of the House Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises Paul Kanjorski (D-Pennsylvania) minced no words in telling the credit-rating agencies what he thought of their recent performance.
At the May 19 hearing before his subcommittee, Kanjorski said: "[I]f we were to turn the tables today and rate the rating agencies, I suspect that most members of the Capital Markets Subcommittee would agree that during the height of the securitization boom the rating agencies were double-A if not triple-A failures. Clearly, they flunked the class on how to act as effective gatekeepers to our capital markets."
The hearing was being held to explore approaches for tightening the regulation of the rating agencies.
Kanjorski said in his opening statement, "The role of the major credit-rating agencies in contributing to the current financial crisis is now well-documented. At the very best, their assessments of packages of toxic securitized mortgages and overly complex structured finance deals were outrageously optimistic. At the very worst, these ratings were grossly negligent."
The chairman indicated where he thinks tighter regulation is needed. He said the rating agencies "must face tougher disclosure and transparency requirements." He specifically said investors currently receive "too little information on rating methodologies."
Kanjorski said that in addition to a new …