Released: October 29, 2009

Credit-rating bill clears committee

Source: Zachary Goldfarb, Washington Post (Free Registration)

A House panel on Wednesday voted to tighten controls on credit-rating firms in response to complaints that the firms misjudged the risks of many of the mortgage-related securities that sank financial markets last year.

The House Financial Services Committee threw bipartisan support behind a bill that would try to reduce the conflicts of interests at rating firms and make it easier to sue them when they make flawed findings.

The three big credit-rating firms—Moody’s, Standard & Poor’s and Fitch Ratings—have faced stinging criticism in the past two years for giving high marks to mortgage-related securities that were backed by subprime or otherwise risky loans, helping instill a false sense of confidence among investors in the investments being sold by banks.

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