U.S. Debt Rating: Economists Wait to Hear From S&P


Jim Nadler, president of Kroll Bond Ratings, said his one-year old company is trying to break the "oligarchy" comprised of Moody's, Fitch and S&P. He said the agencies have overstepped appropriate lines by becoming too involved in policy making instead of sticking to ratings.

"As they became more high profile, it appears as though they have become more involved or more interested in the politics of budgets, revenue and things like that instead of a bystander," Nadler told ABC News. "I think once you inject yourself you begin to lose your independence."

Legislators have questioned the ratings agencies' responsibility in the financial meltdown for giving high ratings to risky mortgage-backed securities and collateralized debt obligations.

On July 27, a House oversight subcommittee on financial services held a hearing questioning executives of Moody's and S&P, including S&P president, Deven Sharma.

"We at S&P certainly share the goal of enhancing the transparency, integrity and quality of ratings and the ratings process," Sharma said in his prepared remarks. "We also firmly believe that perhaps the most important value of ratings is their independence."

This week, the Associated Press reported Moody's, Fitch Ratings and S&P and its parent company, McGraw-Hill, have spent $1.76 million total this year to lobby Congress and federal agencies for a range of issues.

"Fitch sometimes utilizes lobbyists, but such corporate matters are completely separate from and have zero influence upon our analytical groups that assign ratings," Daniel J. Noonan, corporate communications managing director of Fitch Ratings, said.

McGraw-Hill also points out that the company's interactions with lawmakers include answering questions, on a range of topics including those related to its educational publishing business.

"Our analysts convey independent opinions about creditworthiness to the market using rigorous analytical criteria," Patti Röckenwagner, marketing and communications senior vice president of The McGraw-Hill Companies, told ABC News. "Our lobbyists express views about public policy to the government. There is a strict firewall that separates the two --- always has been, always will be."

Phillip Swagel, former assistant secretary for economic policy at the Treasury Department from 2006 to 2009 and former chief of staff at the White House Council of Economic Advisers, said there is no evidence the rating agencies' regulatory comments are related to their views on sovereign credit.

"Every firm, including the rating agencies, has a right and a responsibility to comment on the many regulatory decisions under Dodd-Frank -- the agencies would be remiss if they did not comment," Swagel told ABC News. "And in any case, they agree with the regulators that their ratings should not be embedded into official decisions."

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