Search
 
News

Sen. Warren Wants the SEC to Crack Down on Inflated Bond Ratings

The agency needs to address the conflict of interest of bond ratings agencies being paid by bond issuers, Warren says.

Sen. Elizabeth Warren

Senator and presidential candidate Senator Elizabeth Warren, D-Mass., wants the SEC to take “immediate” and “meaningful action to curb” inflated ratings by bond rating agencies.

In a letter to SEC Chairman Jay Clayton, Warren, citing a recent Wall Street Journal analysis, writes there are “strong indications” that ratings agencies are giving undeserved higher ratings to risky financial products, much like they did in the lead-up to the last great financial crisis. The recession that followed cost the U.S. economy as much as $14 trillion, according to Warren.

At the root of the problem then and now is the “issuer-pays model” whereby a corporate bond issuer pays a bond rating agency to rate their new issues. That provides an incentive for the rating agency “to give better ratings, regardless of the risk,”  writes Warren.

Complete your profile to continue reading and get FREE access to CUTimes.com, part of your ALM digital membership.

Your access to unlimited CUTimes.com content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical CUTimes.com information including comprehensive product and service provider listings via the Marketplace Directory, CU Careers, resources from industry leaders, webcasts, and breaking news, analysis and more with our informative Newsletters.
  • Exclusive discounts on ALM and CU Times events.
  • Access to other award-winning ALM websites including Law.com and GlobeSt.com.

Already have an account?

NOT FOR REPRINT

© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Bernice Napach

Bernice Napach

Bernice Napach is a senior writer at ThinkAdvisor covering financial markets and asset managers, robo-advisors, college planning and retirement issues. She has worked at Yahoo Finance, Bloomberg TV, CNBC, Reuters, Investor's Business Daily and The Bond Buyer and has written articles for The New York Times, TheStreet.com, The Star-Ledger, The Record, Variety and Worth magazine. Bernice has a Bachelor of Science in Social Welfare from SUNY at Stony Brook.

More from this author

 

Recommended Stories

Credit Union Times

Join Credit Union Times

Don’t miss crucial strategic and tactical information necessary to run your institution and better serve your members. Join Credit Union Times now!

  • Free unlimited access to Credit Union Times' trusted and independent team of experts for extensive industry news, conference coverage, people features, statistical analysis, and regulation and technology updates.
  • Exclusive discounts on ALM and Credit Union Times events.
  • Access to other award-winning ALM websites including TreasuryandRisk.com and Law.com.

Already have an account? Sign In Now
Join Credit Union Times

Copyright © 2023 ALM Global, LLC. All Rights Reserved.