Faulty credit ratings played a key role in our nation’s financial meltdown, and now we have chance to ensure that that doesn’t happen again. The Dodd-Frank Wall Street Reform and Consumer Protection Act created the Office of Credit Ratings to improve regulatory oversight on this issue. Americans for Financial Reform are calling on the SEC to appoint a Director of the Office of Credit Ratings who will make reform a top priority
Mary Schapiro, Chairwoman
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Dear Ms. Schapiro,
Recognizing the central role that faulty credit ratings played in the financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act seeks to improve the reliability of credit ratings by improving the regulatory oversight of credit rating agencies. As you implement these requirements, Americans for Financial Reform urges you to help ensure the effectiveness of this strengthened regulatory oversight by appointing a director of the new Office of Credit Ratings who will make credit rating agency reform a top priority.
The ideal candidate to lead the new Office will be someone who knows the industry and is committed to reforming it. One obvious source of such candidates would be industry whistleblowers who have helped draw attention to the conflicts of interest and abusive practices that contributed rating agency failures. Another possible source would be academics who have studied the industry and documented its weaknesses. Whatever the background of the director, however, it is crucial that he or she see credit rating agency reform as calling for something more than the reduction of reliance on ratings. And, because the individual who leads the new office will also lead the study of alternative business models, that individual must have an open mind with regard to fundamental changes in our approach to assigning and paying for ratings that are needed to restore rating agency independence.
Investors are relying on the Commission to implement the Dodd-Frank Act in a way that delivers on its promise to transform our financial system. Appointing a “safe” candidate who will be viewed as acceptable to the ratings agencies will not get the job done. We therefore urge you to show your commitment to genuine reform by making a bold choice of an industry reformer to head the new credit rating agency oversight office at the SEC.
Americans for Financial Reform
Americans for Financial Reform is an unprecedented coalition of over 250 national, state and local groups who have come together to reform the financial industry. Members of our coalition include consumer, civil rights, investor, retiree, community, labor, religious and business groups as well as Nobel Prize-winning economists.