Attorney General Cuomo Announces Deal With Credit Rating Agencies
June 16, 2008
On June 5, 2008, New York Attorney General Andrew Cuomo announced an agreement he reached with Moody’s, Standard & Poor’s and Fitch Ratings to overhaul some of their business practices related to complex mortgage-backed securities. The SEC helped support the probe by Cuomo’s office into the rating agencies. The agreement is designed to end “ratings shopping” by changing the way agencies are paid. Previously, investment banks that wanted to take mortgage-backed securities to market would request that all three agencies present a rating on the debt and the investment bank would choose the most favorable. Now, instead of being paid at the end of the transaction after the rating was presented to the investment bank, the agreement requires the agencies be paid at four different points. SEC Chairman Cox, whose office helped support the agreement, praised Cuomo for his efforts, which are consistent with the SEC’s pending rulemaking.
http://www.sec.gov/news/press/2008/2008-109.htm