Ratings oversight unwise
We disagree with Jeffrey Manns' conclusions in the article "Let's Downgrade S&P, Moody's Ratings Oligopoly," March 9.
As the SEC pointed out in its December report on various business models, every model has pros and cons. We believe that the issuer-pays model is the best for a major rating agency since it provides the greatest transparency to the market by making public ratings available free of charge to all investors. Public disclosure of our ratings means our opinions are subjected to market scrutiny every day.
Establishing an oversight board to assign ratings on certain structured finance products could have the unintended consequence of leading investors to think ratings are endorsed by the government. The policy of the U.S. government is to reduce mechanistic reliance on ratings by eliminating references to credit ratings in certain regulations. We support that policy. We also support enhancements to the Rule 17g-5 program along the lines discussed in the SEC study on assigned credit ratings.
But an oversight board to assign ratings -- by giving the appearance of a governmental imprimatur -- would run counter to the U.S. government's own objectives.
Executive managing director of global analytics and operations,
Standard & Poor's Ratings Services