Credit rating firms could be losing more business
Payback can be a pain, and credit-rating firms may soon be paying in spades for missing the warning signs that led to the financial meltdown. Thursday's Wall Street Journal reported that the National Association of Insurance Commissioners (NAIC) may award bond analysis work on residential mortgage-backed assets to BlackRock (BLK), rather than depend on major credit rating firms. In a related story, the Journal reported that the Fed announced it would open the door to more credit raters for its Term Asset-Backed Securities Loan Facility (TALF).
It appears that regulators want to break the choke hold the credit-rating agencies and Wall Street investment banks have on determining the value of assets to be traded. Insurance regulators want to change the game by improving the methods used to value portfolios held by insurance companies. Any changes they implement will have an impact on the value of assets that pension funds and other investors hold. But beyond that, investors should welcome anything the insurance regulators and the Fed can do to increase the scrutiny of credit ratings.