Sense on Cents

The ratings process for the securities industry has been an absolute joke. With all due respect to those who work at the rating agencies, the business model and massive conflicts of interest have been an unmitigated disaster. 

Where were the authorities with the vision to throw on the flashing yellow light in the midst of the storm? Well, we can all take comfort that the SEC has been working on reviewing the rating agencies model since late 2006 and has made 5 rulings. Over and above that, Ms. Schapiro shares with us that the SEC has undertaken further studies over the last ten months.  2006? Ten months? When the need for dynamic movements is never greater, our government continues to move at a snail’s pace. 

Let’s listen to Ms. Mary Schapiro, current head of the SEC. It’s a long clip (approximately 55 minutes), but you can fast forward along the way at any time. CSPAN did not provide an embed code for this clip, but by clicking on the image below you will be brought directly to the CSPAN site and the video will begin playing.

As I listen to Ms. Schapiro pontificate about the concepts of aligning interests, business models, users of ratings, conflicts, multiple ratings, and ending reliance on ratings agencies, I have one very clear cut image piercing through my mind.

That image is of Harry Markopolos providing chilling Congressional testimony this past January on the failures of the SEC in handling the Madoff scam. I learned more about the SEC in Harry’s testimony than I had over the course of my entire career on Wall Street. 

Couldn’t we use a guy like Harry running the SEC right now? 

LD

This entry was posted on Wednesday, April 15th, 2009 at 2:39 PM and is filed under General, Harry Markopolos, Mary Schapiro, SEC. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.