Ratings Lawsuits
During the debate, S&P resisted a proposal that would allow the government to choose which ratings firm would rate each offering, as well as proposals that would make judges less likely to dismiss lawsuits against ratings firms.
In March, 2010, a company lobbyist sent an e-mail to Senate Republican staffers suggesting that lawmakers band together to block the proposal from reaching the Senate floor, according to a copy of the e-mail obtained by Bloomberg News. McGraw-Hill spent more than $3 million lobbying lawmakers in 2009 and 2010, the two years of the financial regulation debate in Congress, according to federal disclosures.
Mandated Reliance
While the Financial Crisis Inquiry Commission concluded the ratings firms were “key enablers of the financial meltdown,” Congress and the administration struggled to find consensus on how to reduce the reliance on ratings. Corporations, banks and even governments were required to seek a stamp of approval before bond offerings primarily from just three firms: S&P, Moody’s and Fitch, half-owned by Fimalac SA of Paris and half owned by Hearst Corp.
Michael Barr, the Treasury Department official who led the administration’s efforts to rewrite financial rules, said Dodd- Frank has helped increase transparency in the ratings, gave the Securities and Exchange Commission oversight, removed an existing legal liability shield attached to the companies, and reduced the mandated reliance on their work.
It stopped short of a complete restructuring of the industry dominated by just three firms, pushing against proposals that that would have placed the government in a dominant role in the marketplace, he said.
New Rules
“You can’t just change it completely overnight,” Barr, a former assistant Treasury secretary and now professor at the University of Michigan, said in a telephone interview.
The SEC has adopted new rules and modified others. It has created an office to oversee and develop rules for the industry.