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1、精选优质文档-倾情为你奉上一、 外文原文The Credit Rating Agencies: How Did We Get Here? Where Should We Go? Lawrence J. White* an insured state savings associationmay not acquire or retain any corporate debt securities not of investment grade. 12 Code of Federal Regulations 362.11 any user of the information contained

2、 herein should not rely on any credit rating or other opinion contained herein in making any investment decision. The usual disclaimer that is printed at the bottom of Standard & Poors credit ratings The U.S. subprime residential mortgage debacle of 2007-2008, and the world financial crisis that has

3、 followed, will surely be seen as a defining event for the U.S. economy - and for much of the world economy as well - for many decades in the future. Among the central players in that debacle were the three large U.S.-based credit rating agencies: Moodys, Standard & Poors (S&P), and Fitch. These thr

4、ee agencies initially favorable ratings were crucial for the successful sale of the bonds that were securitized from subprime residential mortgages and other debt obligations. The sale of these bonds, in turn, were an important underpinning for the U.S. housing boom of 1998-2006 - with a self-reinfo

5、rcing price-rise bubble. When house prices ceased rising in mid 2006 and then began to decline, the default rates on the mortgages underlying these bonds rose sharply, and those initial ratings proved to be excessively optimistic - especially for the bonds that were based on mortgages that were orig

6、inated in 2005 and 2006. The mortgage bonds collapsed, bringing down the U.S. financial system and many other countries financial systems as well. The role of the major rating agencies has received a considerable amount of attention in Congressional hearings and in the media. Less attention has been

7、 paid to the specifics of the financial regulatory structure that propelled these companies to the center of the U.S. bond markets and that thereby virtually guaranteed that when they did make mistakes, those mistakes would have serious consequences for the financial sector. But an understanding of

8、that structure is essential for any reasoned debate about the future course of public policy with respect to the rating agencies. This paper will begin by reviewing the role that credit rating agencies play in the bond markets. We then review the relevant history of the industry, including the cruci

9、al role that the regulation of other financial institutions has played in promoting the centrality of the major credit rating agencies with respect to bond information. In the discussion of this history, distinctions among types of financial regulation especially between the prudential regulation of

10、 financial institutions (which, as we will see, required them to use the specific bond creditworthiness information that was provided by the major rating agencies) and the regulation of the rating agencies themselves are important. We next offer an assessment of the role that regulation played in en

11、hancing the importance of the three major rating agencies and their role in the subprime debacle. We then consider the possible prospective routes for public policy with respect to the credit rating industry. One route that has been widely discussed and that is embodied in legislation that the Obama

12、 Administration proposed in July 2009 would tighten the regulation of the rating agencies, in efforts to prevent the reoccurrence of those disastrous judgmental errors. A second route would reduce the required centrality of the rating agencies and thereby open up the bond information process in way

13、that has not been possible since the 1930s.Why Credit Rating Agencies? A central concern of any lender - including the lender/investors in bonds - is whether a potential or actual borrower is likely to repay the loan. This is, of course, a standard problem of asymmetric information: The borrower is

14、likely to know more about its repaying proclivities than is the lender. There are also standard solutions to the problem: Lenders usually spend considerable amounts of time and effort in gathering information about the likely creditworthiness of prospective borrowers (including their history of loan

15、 repayments and their current and prospective financial capabilities) and also in gathering information about the actions of borrowers after loans have been made.The credit rating agencies (arguably) help pierce the fog of asymmetric information by offering judgments - they prefer the word opinions

16、- about the credit quality of bonds that are issued by corporations, governments (including U.S. state and local governments, as well as sovereign issuers abroad), and (most recently) mortgage securitizers. These judgments come in the form of “ratings”, which are usually a letter grade. The best kno

17、wn scale is that used by S&P and some other rating agencies: AAA, AA, A, BBB, BB, etc., with pluses and minuses as well.4Credit rating agencies are thus one potential source of such information for bond investors; but they are far from the only potential source. There are smaller financial services

18、firms that offer advice to bond investors. Some bond mutual funds do their own research, as do some hedge funds. There are “fixed income analysts” at many financial services firms who offer recommendations to those firms clients with respect to bondinvestments. Although there appear to be well over

19、100 credit rating agencies worldwide,6 the three major U.S.-based agencies are clearly the dominant entities. All three operate on a worldwide basis, with offices on all six continents; each has ratings outstanding on tens of trillions of dollars of securities. Only Moodys is a free-standing company

20、, so the most information is known about Moodys: Its 2008 annual report listed the companys total revenues at $1.8 billion, its net revenues at $458 million, and its total assets at year-end at $1.8 billion.7 Slightly more than half (52%) of its total revenue came from the U.S.; as recently as 2006

21、that fraction was two-thirds. Over two-thirds (69%) of the companys revenues comes from ratings; the rest comes from related services. At year-end 2008 the company had approximately 3,900 employees, with slightly more than half located in the U.S. Because S&Ps and Fitchs ratings operations are compo

22、nents of larger enterprises (that report on a consolidated basis), comparable revenue and asset figures are not possible. But S&P is roughly the same size as Moodys, while Fitch is somewhat smaller. Table 1 provides a set of roughly comparable data on each companys analytical employees and numbers o

23、f issues rated. As can be seen, all three companies employ about the same numbers of analysts; however, Moodys and S&P rate appreciably more corporate and asset-backed securities than does Fitch. The history of the credit rating agencies and their interactions with financial regulators is crucial fo

24、r an understanding of how the agencies attained their current central position in the market for bond information. It is to that history that we now turn.What Is to Be Done? In response to the growing criticism (in the media and in Congressional hearings) of the three large bond raters errors in the

25、ir initial, excessively optimistic ratings of the complex mortgage-related securities (especially for the securities that were issued and rated in 2005 and 2006) and their subsequent tardiness in downgrading those securities, the SEC in December 2008 promulgated NRSRO regulations that placed mild re

26、strictions on the conflicts of interest that can arise under the rating agencies issuer pays business model (e.g., requiring that the agencies not rate debt issues that they have helped structure, not allowing analysts to be involved in fee negotiations, etc.) and that required greater transparency

27、(e.g., requiring that the rating agencies reveal details on their methodologies and assumptions and track records) in the construction of ratings. Political pressures to do more - possibly even to ban legislatively the issuer pays model have remained strong. In July 2009 the Obama Administration, as

28、 part of its larger package of proposed financial reforms, offered legislation that would require further, more stringent efforts on the part of the rating agencies to deal with the conflicts and enhance transparency. This regulatory response the credit rating agencies made mistakes; lets try to mak

29、e sure that they dont make such mistakes in the future is understandable. But it ignores the history of the other kind of financial regulation the prudential regulation of banks and other financial institutions - that pushed the rating agencies into the center of the bond information process and tha

30、t thereby greatly exacerbated the consequences for the bond markets when the rating agencies did make those mistakes. It also overlooks the stultifying consequences for innovation in the development and assessment ofinformation for judging the creditworthiness of bonds. Regulatory efforts to fix pro

31、blems, by prescribing specified structures and processes, unavoidably restrict flexibility, raise costs, and discourage entry. Further, although efforts to increase transparency may help reduce problems of asymmetric information, they also have the potential for eroding a rating firms intellectual p

32、roperty and, over the longer run, discouraging the creation of future intellectual property. There is another, quite different direction in which public policy might proceed in the wake of the credit rating agencies mistakes. Rather than trying to fix them through regulation, it would provide a more

33、 markets-oriented approach that would likely reduce the importance of the incumbent rating agencies and thus reduce the importance (and consequences) of any future mistakes that they might make. This approach would call for the withdrawal of all of those delegations of safety judgments by financial

34、regulators to the rating agencies. The rating agencies judgments would no longer have the force of law. Those financial regulators should persist in their goals of having safe bonds in the portfolios of their regulated institutions (or that, as in the case of insurance companies and broker-dealers,

35、an institutions capital requirement would be geared to the risk ness of the bonds that it held); but those safety judgments should remain the responsibility of the regulated institutions themselves, with oversight by regulators.Under this alternative public policy approach, banks (and insurance comp

36、anies, etc.) would have a far wider choice as to where and from whom they could seek advice as to the safety of bonds that they might hold in their portfolios. Some institutions might choose to do the necessary research on bonds themselves, or rely primarily on the information yielded by the credit

37、default swap (CDS) market. Or they might turn to outside advisors that they considered to be reliable - based on the track record of the advisor, the business model of the advisor (including the possibilities of conflicts of interest), the other activities of the advisor (which might pose potential

38、conflicts), and anything else that the institution considered relevant. Such advisors might include the incumbent credit rating agencies. But the category of advisors might also expand to include the fixed income analysts at investment banks (if they could erect credible Chinese walls) or industry a

39、nalysts or upstart advisory firms that are currently unknown. The end-result - the safety of the institutions bond portfolio - would continue to be subject to review by the institutions regulator. That review might also include a review of the institutions choice of bond-information advisor (or the

40、choice to do the research in-house) - although that choice is (at best) a secondary matter, since the safety of the bond portfolio itself (regardless of where the information comes from) is the primary goal of the regulator. Nevertheless, it seems highly likely that the bond information market would

41、 be opened to new ideas - about ratings business models, methodologies, and technologies - and to new entry in ways that have not actually been possible since the 1930s. It is also worth asking whether, under this approach, the issuer pays business model could survive. The answer rests on whether bo

42、nd buyers are able to ascertain which advisors do provide reliable advice (as does any model short of relying on government regulation to ensure accurate ratings). If the bond buyers can so ascertain, then they would be willing to pay higher prices (and thus accept lower interest yields) on the bond

43、s of any given underlying quality that are rated by these reliable advisors. In turn, issuers - even in an issuer pays framework - would seek to hire these recognized-to-be-reliable advisers, since the issuers would thereby be able to pay lower interest rates on the bonds that they issue. That the i

44、ssuer pays business model could survive in this counter-factual world is no guarantee that it would survive. That outcome would be determined by the competitive process.Conclusion Whither the credit rating industry and its regulation? The central role - forced by seven decades of financial regulatio

45、n - that the three major credit rating agencies played in the subprime debacle has brought extensive public attention to the industry and its practices. The Securities and Exchange Commission has recently (in December 2008) taken modest steps to expand its regulation of the industry. The Obama Admin

46、istration has proposed further efforts. There is, however, another direction in which public policy could proceed: Financial regulators could withdraw their delegation of safety judgments to the credit rating agencies. The policy goal of safe bond portfolios for regulated financial institutions woul

47、d remain. But the financial institutions would bear the burden of justifying the safety of their bond portfolios to their regulators. The bond information market would be opened to new ideas about rating methodologies, technologies, and business models and to new entry in ways that have not been pos

48、sible since the 1930s. Those who are interested in this public policy debate should ask themselves the following questions: Is a regulatory system that delegates important safety judgments about bonds to third parties in the best interests of the regulated financial institutions and of the bond mark

49、ets more generally? Will more extensive regulation of the rating agencies actually succeed in forcing the rating agencies to make better judgments in the future? Would such regulation have consequences for flexibility, innovation, and entry in the bond information market? Or instead, could the financial institutions be trusted to seek their own sources of information about the creditworthiness of bonds, so long as financial regulato