Lawmakers turn to credit raters, prepare overhaul

[TomCADem]

Source: Associated Press

WASHINGTON (AP) -- Lawmakers rewriting financial regulations took aim Friday at credit rating agencies, whose analysts often gave safe ratings to risky investments that fueled the financial crisis.

Sen. Carl Levin, D-Mich., said the Senate's regulatory overhaul should go further to curb the industry's inherent conflicts of interest: The agencies are paid by the banks whose investments they rate. Banks generally want higher ratings to make the securities they offer more attractive to investors.

At a hearing Levin chaired Friday, former executives acknowledged that competition within the industry often led the agencies' analysts to rate high-risk securities as safe.

Levin suggested the co-dependent relationship between the agencies and the banks is a dangerous flaw in the financial system. He offered an analogy: "It's like one of the parties in court paying the judge's salary."


Read more: http://finance.yahoo.com/news/Lawmakers-turn-to-credit-apf-331555961.html?x=0

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Cue the Republican complaints about Democrats not being bi-partisan, which is code for water down the bill, not strengthen it.