The debate over ratings agencies and how they should -- or shouldn't be -- reined in continues to rage in Washington, D.C., and New York.
Right now there are two amendments to the financial reform bill under debate that are grabbing all the attention.
One would create a federal clearinghouse that would dole out ratings contracts to firms like Moody's, Standard & Poor's and Fitch, instead of letting bankers choose the agencies that rate their products themselves. This amendment has been criticized for maintaining the official Nationally Recognized Statistical Rating Organizations designation. Though it seeks to weaken the privileged relationship the ratings agencies enjoy with the government, it still has the agencies on a government-mandated pedestal.
Another amendment would destroy the relationship entirely and get rid of special NRSRO designation. That way, firms would have to do their own research and not rely on government-backed agencies. This amendment is a welcome sign for firms that want to penetrate what is seen as a monopoly and break into the ratings business: Both KPMG and PwC are looking to branch out in that direction. More competition should mean ultimately fairer ratings, according to the amendment's supporters.
Write to Julie Steinberg