Meredith Whitney rose to fame as one of the few people who predicted the financial crisis ahead of time, with her bearish calls on banks and warnings about the dangers to the economy from the housing bubble. As such, she's probably one of the more-qualified people to head a credit agency -- and now she plans to start one, the Financial Times reports.
Whitney left her position at Oppenheimer early last year to open her own research company, Meredith Whitney Advisory Group. Now, she tells the Financial Times she plans to seek approval from the Securities & Exchange Commission to become a "nationally recognized statistical rating organization," a requirement for any company that intends to charge debt issuers for ratings that investors are able to use.
As a credit rating agency, she will compete with dominant firms Moody's Investors Service and Standard & Poor's, as well as other smaller players in the field. Already, she has been creating ratings for the $2.8 trillion municipal bond market. She plans to rate global structured products, global corporate bonds and U.S. municipal bonds.
Credit rating agencies are blamed for contributing to the financial crisis by giving high ratings to risky structured debt products backed by U.S. mortgages. At least part of the trouble allegedly arose from the fact that the entities paying for the ratings were the same ones issuing the securities. Since then, rules have been established to better manage conflicts of interest. Whitney said that, with good business practices in place, she doesn't believe such conflicts will be a problem for her new agency.