Rating Agency Reforms Still Slow After Financial Crisis

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February 7, 2013

This week, the Justice Department filed a lawsuit against the rating agency Standard & Poor’s accusing them of giving safe ratings to mortgage securities when they knew they were toxic to increase profits. The lawsuit is an important step in following up on what caused the financial collapse, but critics say it doesn’t address the underlying problems with the ratings industry.

From a Washington Post story:

The lawsuit “may help the government appear to be dealing with the problem and holding the S&P to account, but that isn’t dealing with the core problems,” said Jeffrey Manns, associate professor of law at George Washington University.

The key issue, identified by two major government reports on the crisis, is that rating agencies are paid by the very companies whose products they are grading. Watchdogs argue that the agencies’ dependence on Wall Street means they tend to award better grades to products even if they have reason to doubt their safety.

Read more at The Washington Post.

Topics: Financial Sector

Related Content: Financial Oversight

Authors: Andre Francisco

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