Looks like an interesting panel — anyone near D.C. on April 15 should consider going . . .

10:10 a.m. — Panel One: Current NRSRO Perspectives: What Went Wrong and What Corrective Steps Is the Industry Taking?

  • Daniel Curry, DBRS
  • Sean Egan, Egan-Jones Ratings
  • Stephen Joynt, Fitch Ratings
  • Raymond McDaniel, Moody’s Investor Service
  • Deven Sharma, Standard & Poor’s

11:30 a.m. — Panel Two: Competition Issues: What are Current Barriers to Entering the Credit Rating Agency Industry?

  • Ethan Berman, RiskMetrics Group
  • James H. Gellert, RapidRatings
  • George Miller, American Securitization Forum
  • Frank Partnoy, University of San Diego
  • Alex Pollock, American Enterprise Institute
  • Damon Silvers, AFL-CIO
  • Lawrence J. White, New York University

12:30 p.m. — Lunch Break

1:15 p.m. — Panel Three: Users’ Perspectives

  • Deborah A. Cunningham, Securities Industry and Financial Markets Association
  • Alan J. Fohrer, Southern California Edison
  • Christopher Gootkind, Wellington Management
  • James Kaitz, Association of Financial Professionals
  • Kurt N. Schacht, CFA Institute
  • Bruce Stern, Association of Financial Guaranty Insurers
  • Paul Schott Stevens, Investment Company Institute

2:45 p.m. — Panel Four: Approaches to Improve Credit Rating Agency Oversight

  • Richard Baker, Managed Funds Association
  • Jörgen Holmquist, European Commission
  • Mayree C. Clark, Aetos Capital
  • Joseph A. Grundfest, Stanford Law School
  • Glenn Reynolds, CreditSights
  • Stephen Thieke, Group of Thirty

The roundtable is expected to end at approximately 4:15 p.m. with concluding remarks by Erik R. Sirri, Director of the SEC’s Division of Trading & Markets.

In the fall of 2006, Congress passed the Credit Rating Agency Reform Act, providing the SEC for the first time with authority to supervise credit rating agencies. Using this authority that became effective in June 2007, the Commission has adopted two major rulemakings, has conducted an extensive 10-month examination of three major credit rating agencies, and has several pending proposals to further the Act’s purpose of promoting accountability, transparency, and competition in the rating industry.

>

SEC Roundtable to Examine Oversight of Credit Rating Agencies
2009-46

http://www.sec.gov/news/press/2009/2009-46.htm

Washington, D.C., March 6, 2009 — The Securities and Exchange Commission will hold a roundtable on April 15 relating to its oversight of credit rating agencies. Discussion topics will include issues related to recent SEC rulemaking initiatives, such as conflicts of interest, competition, and transparency.

In the fall of 2006, Congress passed the Credit Rating Agency Reform Act, providing the SEC for the first time with authority to supervise rating agencies. Using this authority that became effective in June 2007, the Commission has adopted two major rulemakings, has conducted an extensive 10-month examination of three major credit rating agencies, and has several pending proposals to further the Act’s purpose of promoting accountability, transparency, and competition in the rating industry.

“Although our statutory authority to regulate rating agencies has only been effective for less than two years, it is clearly one of this agency’s most important responsibilities,” said SEC Chairman Mary L. Schapiro. “The SEC will hear from leading experts on credit rating agencies and the financial markets. Their insight will help the Commission as it continues its aggressive oversight of the industry, and considers whether to adopt the pending proposals.”

Roundtable participants will include leaders from investor organizations, financial services associations, government agencies, credit rating agencies, and academia. A final agenda including a list of panelists will be announced at a future date.

The roundtable will be held in the auditorium at the SEC’s headquarters at 100 F Street, NE, in Washington, D.C. The roundtable will be open to the public with seating on a first-come, first-served basis. The roundtable also will be webcast on the SEC Web site.

Category: Bailouts, Credit, Legal, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

73 Responses to “SEC Examining Oversight of Credit Rating Agencies”

  1. GB says:

    Barry – Why don’t we see your name in the speaker list?

  2. Super-Anon says:

    All these regulators and politicians were patting themselves on the back for a job well done during the peak of the bubble. Anybody screaming about this stuff in 2005 knows they were marginalized as a “fringe lunatic”.

    What is the point of regulation if the regulators don’t understand finance and economics except for when it’s politically expedient?

    No part of the “re-regulation” agenda addresses the fundamental problem of regulators only doing their job selectively.

    It looks to me like yet another special interest group using a crisis as an excuse for a power grab.

  3. here comes another push – xlf leading. 820 or bust.

  4. get through 809 around 2

    onto 815 by 3

    820 @ close

  5. one negative tea leave – there’s quite a bit of selling going into this strength.

  6. Super-Anon says:

    I’m not really a technical trader, but it sure is fun to draw lines on a chart during the trading day.

  7. Super-Anon says:

    I noticed that the momentum of financials and REITs is not keeping up the major indicies again. That always gets me scratching my head…

  8. leftback says:

    XLF may be making a lower high, which is not a good sign for this rally.

    I don’t want to short the XLF with the “Mark-To-Fantasy” chatter out there.
    But if that doesn’t come to pass, this thing will fall like a stone.

  9. in a bear market – it’s very hard to consistently make money without TA.

    in a bull market ANY trader can make money.

    i hope the forum forgives me if i am cluttering up the posts with these nuggets/turds from the turret. if it’s a nuisance i will stop.

  10. Gavshire Hathaway says:

    guidepostings,

    Really appreciate your posts. Please keep them coming!

  11. Super-Anon says:

    in a bear market – it’s very hard to consistently make money without TA.

    I guess I’m not really sure precisely what counts as technical analysis:

    When we got under 700 I figured the market was oversold. Too much bearish sentiment, too many down days in a row. It just felt overdone so I started covering shorts and putting on long positions.

    Now I’m getting a similar feeling about the upside now. I wouldn’t rule out something like 900, but the movement makes me feel more comfortable about taking off long positions and putting on short positions.

    Does that count as technical analysis?

  12. leftback-

    looks to me like the xlf is consolidating under a moving average before busting through it later in the day. getting above 9.07 in this hour would qualify.

  13. leftback says:

    My instincts tell me not to get in the way of this here. Kind of like the SKF in October…

  14. Moss says:

    Where is the panel on illegal activity?
    Or is that covered on What Went Wrong.
    I hope corrective action includes jail time for these SOB’s.

  15. leftback says:

    “Where is the panel on illegal activity?”

    The wheels of Justice grind exceeding slow, my friend, but grind they shall.

  16. franklin411 says:

    Off topic, but word is Dylan Ratigan is signed up with ABC News now. We won’t see him on the air for 6 months, though, due to a 6 month noncompete clause in his contract with CNBC.

    Melissa Lee is in as Fast Money host…bleh… I’m going to start watching “The FBI Files” on Discovery instead.

  17. leftback says:

    Melissa Lee has been rated “AAA” by Moody’s and S&P, but slightly lower at Schadenfreude Asset Mgmt.

    “exited longs.”

    And why not? You’re in the money. My swing trades have a few days in ‘em, I hope.
    We may see a + ve factory orders number tomorrow, could be good for a modest leg higher.

  18. i will most likely buy back before the close or after tomorrows open.

    my trading vehicles of late has been fas/faz. i find them more attractive than options due to their liquidity.

    holding to me when they swing 10-20% in a matter of hours is not permitted if i feel a pivot has been reached.

  19. leftback says:

    Alexis Glick looked very perturbed this morning with the protestors in the City Of London.
    Generally speaking it was more amiable than the crowds for an English soccer match.

    I probably will not be taking her to the Fulham v Millwall match any time soon.

  20. Super-Anon says:

    my trading vehicles of late has been fas/faz. i find them more attractive than options due to their liquidity.

    Have you had any liquidity problems with FAS/FAZ?

    I was playing around with FAZ but switched back to SKF after I had a sell order take longer than I was comfortable with.

  21. call me ahab says:

    @ super-anon-

    average volume for SKF and FAZ is similar- today however FAZ has 73million vs 30million for SKF- would think trades would happen fairly quickly.

  22. to keep things liquid i limit my buys with fas to 10K share lots – faz 3K lots.

    sell orders – fas 20K faz 6K

  23. Todd says:

    My use of TA is done with the knowledge that there are a lot of people using it for their trade decisions. Knowing this and knowing the company helps a lot in the trade.

  24. batmando says:

    @ guidepostings
    @ 3:16 Here comes the PPT?

  25. Super-Anon says:

    to keep things liquid i limit my buys with fas to 10K share lots – faz 3K lots.

    sell orders – fas 20K faz 6K

    A few days back I sold 5K shares of FAZ. Seemed to take about 2 mins and got split 10 different ways.

    I don’t know if it’s my broker or what (big name stock/mutual fund focused company), but I just wasn’t used to seeing that with SKF. I’m used to seeing confirms within about 5-10 seconds.

    I might try doing some FAS/FAZ trades with an alternate broker I have that I use for futures and see how that works out.

  26. AmenRa says:

    @batmando

    Here we come to save the day!!!

  27. Mannwich says:

    Never fails. Big uptick in buying in the last 20-30 minutes of trading. Am I the only one who finds that a bit strange?

  28. leftback says:

    @ 3:16 Here comes the PPT?

    No such thing, old chap. It’s just a bit of portfolio dressing at Schadenfreude Asset Management.

    IN other news: Thornburg Mortgage filed BK. A major player in the Prime Jumbo space.
    We can look forward to a decrease in the uses of the words: Premium, Upscale, Previously Owned and Luxurious.
    Look forward to an increase in the use of: Cheap, Bargain, Beater and Ostentatious.

  29. Super-Anon says:

    Never fails. Big uptick in buying in the last 20-30 minutes of trading. Am I the only one who finds that a bit strange?

    I’ve noticed this to be very common in bear market rallies, especially when there’s a lot of short interest.

    It’s gotten me into the habit of waiting until after 3:30 pm to put on short positions.

  30. 815 isn’t 820.

    if we close around 815 the odds favor a pullback to around 800 on the open. i would buy into that weakness.

  31. batmando says:

    LB: IN other news: Thornburg Mortgage filed BK.

    Aaaaah THMR, a particularly painful lesson for me

  32. Mannwich says:

    I’m thinking about not even paying attention to the markets until 2 p.m. Central time, the final hour of trading. Seems like that’s when all the real action happens lately. Maybe I’ll just stay in bed until then.

  33. Super-Anon says:

    It’s gotten me into the habit of waiting until after 3:30 pm to put on short positions.

    BTW, that saved my ass a couple of Monday’s ago.

  34. leftback says:

    “a particularly painful lesson for me”

    All those Mortgage guys were on the TV in 2007 telling Porky Pies about their Prime Pristine Portfolios…
    Weep for the sanctity of truth in American business (snark)

    “the final hour of trading”:

    Not for oil, all the action is in the morning, then afternoon short covering.

  35. Todd says:

    @mannwich

    Sounds like a prescription for a 2-3 hour lunch. Knock off early, couple of drinks of your choice. Get back in around 2. Trade for an hour go home.

  36. leftback says:

    Maximum Pain Principle:

    The rally will somehow roll on longer than expected, ending in a big blow-0ff day as shorts finally throw in the towel. After that, many late entrants will take an early bath.

    You think this rally can’t last weeks longer than expected? Just look at last spring…

  37. batmando says:

    LB:
    “a particularly painful lesson for me”

    All those Mortgage guys were on the TV in 2007…

    I should have referenced TMA, which I tried to play when knocked down below $4 in March ’08 and got my ass handed to me.

  38. batmando says:

    LB:
    2008 Mar 14 – May 16 ^10.6%
    2009 Mar 9 – Mar 26 ^23%
    Might Sell in May will come early this year?

  39. leftback says:

    “All those Mortgage guys were on the TV in 2007…”

    That’s why we watch CNBC and Faux with the sound down and get our news from Barry and Mish.

    Just watch the birdies.
    LB notes that Faux Business Channel skirts are rising steadily, even as their viewing figures are falling.

  40. leftback says:

    Q: What’s the capital of Iceland?

    A: About $3.50 – and that’s after their loan from the IMF.

  41. leftback
    Just watch the birdies.
    LB notes that Faux Business Channel skirts are rising steadily, even as their viewing figures are falling.

    If an ebb tide reveals who was swimming nekkid.
    There is a lot more ‘skin’ in this game.

    Ward,
    I’m worried about The Beaver.
    June

  42. tCA says:

    Re: the topic at hand

    Will the current ratings business model remain in place much past these hearings? As well-documented on this website and on others, how does the “you pay me to rate you favorably” have the integrity to withstand time? Put it another way:

    Shamwow guy to prostitute: “How much to tell me you love the Shamwow?”
    Prostitute to Shamwow: “Not much, just a bite.”
    Shamwow to prostitute: “Let’s kiss!”

    Most of you TMZ/Perez Hilton lovers know how that story ends. When is the same fate going to lay waste to S&P as happened to that prostitute?

  43. tCA says:

    PS- It really does always come back to at least hookers, if not blow.

  44. gnomic says:

    4:00pm Tar and fethering of Moody’s and S&P.

    5:00pm gang wiz on SEC building to put bonfire out

  45. Speaking of hookers,
    Let’s get Client #9 back on the case.
    It all makes sense now, heh?

  46. leftback says:

    @ PS- It really does always come back to at least hookers, if not blow.

    True. You can basically look at modern US capitalism as a simple transfer of wealth from little old ladies from Pasadena to hookers and coke dealers, guys called Sal, and the people who install marble counter tops.

    The mortgage brokers, securitizers, ratings agencies, lobbyists, politicians and bankers are just conduits.

  47. tCA says:

    @lb- “The mortgage brokers, securitizers, ratings agencies, lobbyists, politicians and bankers are just conduits.”

    Those clowns take their haircuts or should we say Brazilians in the process.

  48. call me ahab says:

    @ leftback

    “You think this rally can’t last weeks longer than expected? Just look at last spring…”

    If it all comes to housing being the barometer I think there is a good chance that we have seen the worst of it. Whether this alone will lift the markets long term, I don’t know. I would say there is a good chance of happening what you described the other day- just up and down in a narrow range- no bull, no bear.

  49. Mannwich says:

    There are still many boogeymen lurking. Beware. It’s a matter of when, not if, they strike the markets.

  50. leftback says:

    @Mannie: Longer term I am with you. This isn’t your father’s recession. The obvious long-term boogeyman is rising rates but God knows when that will happen. The short-term ones are more obvious.

    (“Write down shocks at banks as jumbo mortgage defaults soar!!” by Penelope Muffington, in Greenwich Time)

    I must take issue with the local deflationists who seem to think that you cannot enjoy the twin horrors of commodity inflation hitting you from behind in the pocket while asset class deflation proceeds in front of you. Add in sticky high unemployment and you have a lovely cocktail.

    Seriously, do any of you ever go shopping for food? A subway ride is going up 25% in NYC soon. Do any of you know any actual middle class Japanese people? Do you think they didn’t see price increases while the carry trade was at its height and the Yen was “tankan”?

    If you watch the price of gasoline since January you are watching the future of our food prices. Wake up. Any success trading this market has been earned by looking out the windscreen – not in the rear view mirror.

  51. Mannwich
    There are still many boogeymen lurking. Beware. It’s a matter of when, not if, they strike the markets.

    There’s that and there is a tendency, and how could one help it, to just look at the US.
    20 years ago, even 10, we were the big dog, not now
    That pesky new world order and all, a thousand points of light, NAFTA, GATT, etc.
    The reds have a $trillion$ of cash, on hand, they can make or break any market they want.
    Play in the casino, but just remember who the house is.

  52. call me ahab says:

    I agree Mannwich- but I have to ask myself- has everyone been so shell shocked that the market can’t take another big fall- I look around and say yes it can- there are so many negatives- but then- maybe it has been cooked in. I definitely don’t see a catlyst for a big rise but maybe a la Roubini we’ll have that L shaped SPX where the bad news just can’t drive it much further. I don’t know . . .

  53. Mannwich says:

    I hear you, leftback. I do think inflation is coming. I just can’t decide when but I don’t think we’re there yet. De-leveraging has only just begun (and may not continue if they can get the game going, I know), and job losses show no signs of abating. How can there be inflation in such an environment until jobs return and housing prices stabilize? I’ve actually seen some decent deals here in Minny on food prices lately. Not crazy cuts but some decent prices in places like Costco for steaks and other meats. Not sure what it’s like in other places though.

    As you and Kedrosky have asserted, perhaps the W shaped recession is the right call. I will say, your calls (and others here) have been pretty darn good lately, so I’d be crazy to not pay some attention. Once this mark-to-market charade goes through, we may get our little run up (although, how much is already priced in?), but it won’t last. Burying the truth of these balances sheets is simply playing games and gets us nowhere towards resolving the underlying issues that we face. Deflation, inflation, either way, we’re going to continue to get smoked in this epic time period that nobody has ever seen or lived through before. Many nasty chapters are to be played out yet. I’ll admit that I’m losing my patience with the markets but am going to hang in there. What else would I do with my life at this point? Business sucks anyway. Might as well hang in there and waste untold hours on sites like this one and others.

  54. Mannwich says:

    Keep in mind consumer spending can’t really bring this economy back unless the consumer: (1) has a job and a regular income, (2) has decent savings to fall back on (how many in this country have that and why spend it when you’re not sure if you’ll need it for basic necessities?), or (3) has more easy credit to just charge it up again, and kick the can down the road even further. Until one or both come back, we’re nowhere near a recovery. I vote for #3 coming back first if the feds are successful in their reflation attempts, which I’m highly circumspect about. If that happens, then maybe #1 will follow. Maybe but common sense tells me we’re in for at least one more big dip, if not several.

  55. TPC says:

    @ Leftback

    Are you bullish or bearish right now?

  56. Moss says:

    Assets purchased with debt are deflating (unlimited past supply of credit) while assets with limited physical supply (commodities) will rise. Commodities tanked since they were being bought with the use of unlimited (past supply) of credit. Real supply and demand will now drive commodities much more than the credit fueled speculation.

  57. leftback says:

    My point is: you can profit by being LONG inflation hedges and SHORT the detritus of the FIRE economy.
    Getting the LONG:SHORT ratios and the timing correct is the hard part.

    You are right – it is going to be long grinding and bloody awful and eventually reminiscent of the 1970s.
    More or less beyond the comprehension of everyone below 35.

  58. Mannwich says:

    Agreed, leftback. Still kicking myself for largely missing this latest run up (not completely, I did grab MOS, MON and PBR) after having gotten ready for it but going against my plan when the Dow and S&P went below my 7,000 and 700 targets. Chalk it up to inexperience. I won’t miss the next one. I hope.

  59. leftback says:

    TPC: Short-term bullish- but only as long as we hold the 780 level. If that caves then I am back on the Dark Side. As I have said before, if we see a blow-off rally and all the shorts fleeing I would sell into that strength.

    I should clarify – I am almost all in energy/materials, and I like distressed stocks like GMO, WFT, AA and UEC.
    Basically I like anything that is connected to a real economy – making things work or filling gas tanks.

    I don’t trade the SPOOS. I mainly trade around a core of energy and commodities. I know I am early.

    When I short I like to use FAZ for short-term trades and QID for the longer trades b/c of lower volatility.
    The higher the banks go on this round the happier I will be – more profits down the line. XLF 10 please !!!

  60. Moss says:

    Does anyone have an opinion on the current dramatic increase in US savings rate?
    Is it simply a reaction to the calamity or a permanent change in behavior.

    The amount of $$ could be staggering over a full year or more.
    Is it feasible for the US to have a positive trade balance in the next 3-5 years?

  61. Moss,
    Is it simply a reaction to the calamity or a permanent change in behavior.

    It all depends on when your ox gets gored.
    Flint MI used to be one of the most vibrant cities in America.
    Dallas TX used to be the hub of the Telecom Corridor.

    Here at the ranch, our ox got gored in telecom meltdown.
    It has been permanent change of behavior for us.

  62. call me ahab says:

    Moss-

    you mean when the savings rate went from negative to positive? I always found it rather embarrassing when it was reported that Americans had a negative savings rate. Talk about optimists- let the good times roll- who needs savings. I know that credit standards have been tightened and is harder to get a loan. People are saving more because they probably don’t feel comfortable spending in such uncertain times. Being a finance major and not an economics major- I can’t answer your last question- however I can assume that if people are saving they are spending less on imports which must reduce the balance of payments.

  63. call me ahab says:

    Foghorn Says:

    “Here at the ranch, our ox got gored in telecom meltdown.
    It has been permanent change of behavior for us.”

    an allegory?

  64. Bruce in Tn says:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aElaOivgENMY&refer=worldwide

    GM Said to Be Warned Obama Won’t Make Debt Payment (Update2)

    “April 1 (Bloomberg) — General Motors Corp.’s 60-day deadline to restructure is unlikely to be extended because the U.S. won’t repay $1 billion in convertible notes maturing June 1, according to a person with knowledge of the discussions. “

  65. Marcus Aurelius says:

    Bad debt is nowhere near unwound. There’s still some Alt-A, some Option ARM, all commercial RE, and a buttload of CC defaults. I see deflation in dollar terms of leveraged assets (as Moss says, and based on the fact that nobody buys what nobody wants, e.g., no demand, price drops), but inflation in terms of income (lower) vs. expenses (static for durables coupled w/inflation in consumables (bread, gas, milk), but not necessarily all commodities – copper, steel, etc).

    The only way out will, eventually, be to inflate (at the personal level and by government action), or default (personal and governmental).

    Other than that, our markets are fundamentally strong.

  66. an allegory?

    On closer inspection, nearer to a mixed metaphor.
    To clarify,
    It was my ox,
    and it went from 100k to zero,
    mixed or not, it was messy.
    But the sun always rises.
    A good wife and a good dog,
    find something more important.

  67. “I’ve actually seen some decent deals here in Minny on food prices lately. Not crazy cuts but some decent prices in places like Costco for steaks and other meats. Not sure what it’s like in other places though.”

    Mannie,

    you’ve seen the Cattle-on-feed report, recently?
    http://www.lmic.info/memberspublic/InTheCattleMarket/Archives/2009/cattlemarkets0323.pdf
    above, and the current report, below
    http://www.lmic.info/memberspublic/InTheCattleMarket.html

    LSS: those lower prices you’re eating=Bellwether Bessie hitting the abattoir

    the ‘banks’ are cramping Credit to Farmers, again, and the Farmers are lightening Herds, and reducing Plantings..

    can you say Demand-push/Supply-constrained Price Increases?

  68. Pat G. says:

    Answers:

    Panel 1: Collusion
    Panel 2: Oligarchy
    Panel 3: Fraudulent
    Panel 4: Replace

  69. usphoenix says:

    Fascinating. The next financial nirvana. Starting new ratings agencies.

    Oooops back up. All these expert consultants are going to have to be hired.

    And the improvement is……..

  70. philipat says:

    This APPEARS very positive, assuming that the SEC will be forced to get off its but and do something in furture.
    More competition is one part of the solution but IMHO the model of the Company/Security being rated paying for the rating is fundamentally flawed. One of the Companies involved, Jones, if I am not mistaken never used this model and always charged users for ratings details. Seems to me a better way to go.

  71. Simon says:

    @ LB

    I like your approach lefty. thanks for your daily comments. I TBP before the market opens in Australia. I don’t trade inter day. I’ve done pretty well buying a trodden down oil services company BLY, leveraged bet due to it’s debt problems, a rare earth exploration company, LYC, again speculative, a deversified resource compnay SRL, and an oil company ROC. My best choice was to start buying the day after the rally started. I got a similar run from the gold miners late last year. I’m looking closely and wanting to buy Northwestern? they are another trodden down services company that is making a run up but I’m nearly 15% into equities so I have to be very careful now. Longer term I’m eyeing up some ag companies.

    To me its somewhat nuts how the powers that be want desperately to restart the credit growth engine. It’s like saying to all those who missed out last time now is your chance. However you guys get the advantage of knowing what follows. Apart from us all becoming socialists I don’t have and alternative. My guess though is that one more severe cycle and the credit growth pundits will be done.

    An alternative will be found or chaos will abound. Hmm it rhymes.

  72. [...] (Update) Big bro started to act now. [...]