PrefBlog

Bloomberg reports:

The U.S. Securities and Exchange Commission may act to curb conflicts of interest at credit-rating companies while delaying a mortgage-bond ranking proposal faulted by underwriters, two people familiar with the matter said.

SEC commissioners plan to bar employees who assess debt from discussing compensation with the bankers selling the bonds, said the people, who declined to be identified before a vote in Washington tomorrow. Commissioners also may limit gifts from underwriters and restrict debt analysts from offering advice on structuring securities to win top grades.

Well, it sure sounds tough doesn’t it? The whole point is to ensure that there are enough rules to ensure that everybody is guilty of something. Then when things go wrong, you have your choice of scapegoat … that’s what regulation’s all about. However, some good might come out of the process:

The SEC sought to encourage unsolicited rankings by proposing another rule in June that would have forced credit- rating companies to publish the data that goes into their assessments. As a result, competitors could have graded bonds even if they weren’t paid by debt underwriters.

New York-based Moody’s in a July 28 letter to the SEC said the proposal would trigger lawsuits and encourage banks to take their business to the credit-rating company that asked for “the least amount of information.”

SEC commissioners will seek a second round of public comment on the proposal instead of adopting it at tomorrow’s 10 a.m. Washington time meeting, the people said.

The ratings agencies’ exemption from Regulation FD must be repealed. It’s the only way … I’ve written an essay on the topic. Unfortunately, however, addressing this issue would involve the authorities admitting that the current system works pretty well and the agencies do a pretty good job … subject to all the caveats that apply in assessment of any forecasting ability.

Since the regulators’ myth-du-jour is that the credit crunch was caused by Evil Credit Agency exploitation of Innocent Portfolio Managers (rarely, if ever, criticized; presumably because they already have regulations coming out their ying-yang) it will be inconvenient to acknowledge reality. Fortunately, this bothers neither regulators nor politicians.

A good solid day for PerpetualDiscounts, up nearly 1% in a sloppy market. Another two weeks of good returns like this and we’ll make up for November!

There were fifty-seven index-included $25-pv-equivalent issues trading over 10,000 shares today

This entry was posted on Wednesday, December 3rd, 2008 at 12:21 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.