The Obama administration has sent a legislative package to Capitol Hill that strengthens supervision of credit rating agencies and improves disclosures about the risks of structured mortgage-backed securities.
The administration wants ratings on structured products to have different symbols than corporate bonds allowing investors to know there is a difference between the two. Second, the rating agencies would provide a "clear report" containing assessments of data reliability, the probability of default, the estimated severity of losses in the event of default, and the sensitivity of a rating to changes in assumptions on structured products, said assistant Treasury secretary Michael Barr.
The administration's proposals also are designed to discourage issuers from "shopping" for the best rating. Mr. Barr said the administration "strongly supports" a proposed rule issued by the Securities and Exchange Commission last year that requires issuers to make the same data they provide to their rating agency available to all rating agencies. This sharing of data is expected to encourage other rating agencies to provide additional, independent analysis to the market.