Sen. Al Franken is welcoming the Securities and Exchange Commission to his long-running effort to oversee the ratings agencies.
The SEC announced that the ratings agency Standard & Poor’s had agreed to pay $58 million to settle charges that it had loosened its ratings to drum up business.
It was the first such action against a ratings agency, the SEC said.
“I’m glad that the SEC has stepped up enforcement against the credit rating agencies whose inflated ratings were at the heart of the financial meltdown,” said Franken, a Minnesota Democrat. “However, this settlement shows that even after the crisis has passed, ratings agencies still haven’t stopped loosening their standards to chase the business of big banks.”
Franken authored a provision of the 2010 Dodd-Frank financial reform law that was meant to prevent the ratings agencies from competing to offer ratings for banks paying for the ratings.
The Financial Crisis Inquiry Commission found that ratings agencies played a critical role in the financial crisis by giving triple-A ratings to mortgage-backed securities made up of subprime mortgages.
Critics of the agencies have said that the current rules do not go far enough to ensure that the ratings agencies do not have an incentive to inflate ratings to generate business.
Franken said Thursday that he is “frustrated that the SEC still hasn’t moved forward with real reform to the credit rating industry.”
The SEC adopted final rules in August on conflicts of interests on ratings. Those rules, however, fall short of Franken’s preferred system, which would be for the agencies to be randomly assigned ratings by a board overseen by the SEC.
