We all know that no one listens to what credit ratings agencies say, and that if you were buying up all of that RMBS eight years ago marveling at what a great deal you were getting on triple-A rated stuff, you had it coming. But wouldn’t it be neat if you could put the tiniest bit of stock into a credit rating? Wouldn’t it be great if the folks at Fitch and Moody’s and S&P actually had to do the things they get paid to do?
The Securities and Exchange Commission is expected as early as this month to finalize new rules meant to better police the industry….
The rules, expected to be somewhat tougher than those proposed more than three years ago, will take additional steps to ensure that the firms' interest in winning business doesn't affect ratings analysis, said the people familiar with the process.
Since no one listens to what credit ratings agencies say, it’s unlikely that the total unreliability of what they say will contribute much to the next financial apocalypse. But what of those weapons of mass financial destruction, the $700 trillion in derivatives floating around out there, just waiting to explode in the face of some giant bank? Regulators want to do something about them, too, and these regulators—the Fed and FDIC—aren’t afraid to ruffle some feathers.
Global regulators came up with an approach that struck some on Wall Street as an unconventional power grab. The regulators have leaned on the International Swaps and Derivatives Association to change, or add to, derivatives contracts so that they provide for a stay even in instances not envisioned under current laws. In the talks with the trade group, the American regulators have even suggested that any changes or additions would affect existing trades, not just new ones….
“The banking industry is saying that, if we waive termination rights and the buy-side doesn’t, you have this total disparity,” he said. “The asymmetry is a very risky proposition.”