The Role of Credit Rating Agencies in the Structured Finance Market

Thursday, September 27, 2007, 2:00 p.m., 2128 Rayburn House Office Building
Capital Markets

Click Here To View Archived Webcast

 Washington, DC—Congressman Paul E. Kanjorski, Chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, today announced a hearing on the role of credit rating agencies in the structured finance market.  The credit rating agencies designated by the U.S. Securities and Exchange Commission as nationally recognized statistical rating organizations (NRSROs) play an integral role in the capital markets, including assessing the creditworthiness of structured finance products like mortgage-backed securities (MBS) and collateralized debt obligations (CDOs).  In response to prior incidents of concern in the debt markets, Congress acted in 2006 to modify and improve the regulatory oversight of NRSROs.  In the wake of the recent credit crunch in global capital markets triggered by problems in subprime lending, many marketplace observers have once again criticized the accuracy of NRSROs in anticipating problems with debt instruments. 

“This hearing will examine a number of questions related to assessing the credit quality of complex financial instruments, understanding the conflicts of interest of NRSROs, and reviewing the role of NRSROs in developing new debt products,” said Chairman Kanjorski.  “We will also study the transparency of NRSRO criteria for evaluating structured products, and evaluating the timeliness of recent decisions to downgrade the ratings of many MBS and CDO products backed by subprime mortgages.”