The Securities and Exchange Commission’s recent roundtable on ratings shopping in structured finance was a reminder of how Sen. Al Franken’s (D-Min.) efforts at reform are obstructed by a wall of denial. Standard & Poor’s denied that any proposal for reform would be workable, and the SEC effectively denied that the issue requires action any time soon. Neither was as direct or as blunt as Moody’s Investors Service CEO Raymond McDaniel, who has previously denied that any problem ever existed.

“That conflicts of interest led to inflated ratings at Moody’s is a concept I categorically reject,” he told the Financial Times last January.  “One way to try and answer this is to make the argument in the negative. Why would it affect only housing and why would it affect only mortgage securities?” He pointed to other types of structured securitizations, involving credit card bills and car loans, which performed well during deep recession.

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