Cuomo Belittles Credit Raters' Reforms
Friday, February 8, 2008
New York Attorney General Andrew Cuomo said yesterday that "supposed reforms" by Standard & Poor's and Moody's Investors Service, which gave high ratings to subprime debt that later plummeted, are "too little, too late."
S&P, the world's largest credit rating service, announced earlier in the day what it called "a broad set of new actions" to strengthen its ratings. Moody's, the second-largest credit-rating company, said this week it was considering a new rating system based on numbers.
"Both S&P and Moody's are attempting to make piecemeal changes that seem more like public relations window dressing than systemic reform," Cuomo said in a statement.
Cuomo said he would continue to investigate "the role played by the ratings agencies in the mortgage meltdown." The companies and Fitch Ratings have been scrutinized by regulators and lawmakers for giving high ratings to subprime-mortgage securities and for reacting too slowly as defaults rose.
Cuomo subpoenaed S&P and Fitch in September as part of his mortgage probe.
"The actions that we are taking today are meaningful and will be important measures to serve the capital markets," S&P spokesman Steven Weiss said in a telephone interview. He said the initiatives pursued by S&P "are making a fundamentally good process better."
S&P said the company was responding to the subpoena it received in September and is "interacting with the attorney general's office."
"We certainly welcome feedback from all market participants and look forward to further constructive dialogue," Moody's spokesman Anthony Mirenda said, responding to Cuomo's statement.
Moody's, based in New York, has received inquiries from "various governmental agencies," he said, declining to say if the company had received a subpoena from Cuomo.
Moody's has separated its credit-ratings operations from its marketing and analytics and Fitch is reassessing the way it grades certain types of debt.