White House proposes crackdown on credit-rating agencies
July 22nd, 2009 - 11:40 am ICT by IANS
Washington, July 22 (DPA) US President Barack Obama has proposed a crackdown on credit-rating agencies, among the key players blamed in a financial crisis that has devastated the global economy.
The proposed legislation sent to Congress is designed to remove conflicts of interest between the private agencies and the banks and lenders that they are rating.
Many argue that credit-rating agencies exacerbated the financial crisis by giving banks clean bills of health for what turned out to be risky loans in the US housing market.
The administration’s plan would ban credit-rating agencies from offering consulting services to companies whose products they rate. They would have to disclose fees and other potential conflicts.
Banks would be forced to disclose the “preliminary ratings” they seek. Many financial firms have been known to shop for credit ratings and only pay the agency that offers them the best diagnosis.
The proposal is part of a much broader overhaul of financial regulation in the US. Obama is hoping to tighten oversight of major banks and extend the government’s regulatory arm to virtually all corners of Wall Street.
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Tags: banks, barack obama, clean bills, conflicts of interest, consulting services, crackdown, credit rating agencies, diagnosis, dpa, financial crisis, global economy, lenders, oversight, private agencies, proposal, regulatory arm, risky loans, us housing market, wall street, white house
