By Barry Ritholtz, The Big Picture
I have to admit to being stymied by this:
“The Securities and Exchange Commission voted Thursday in favor of bringing an administrative action against Egan-Jones, the firm said. In what would be an unprecedented move, the SEC could seek to punish the firm by stripping it of its ability to issue officially recognized ratings on securities tied to government debt and asset-backed deals. An SEC spokesman declined to comment.
"The move stems from alleged “material misstatements” Egan-Jones made when it applied to regulators in 2008 to rate bonds issued by countries, U.S. states and local governments, and asset-backed securities, according to documents reviewed by The Wall Street Journal and people familiar with the matter.” (WSJ)
Here we have an allegation of a specific error, made in good faith by Egan Jones, over the course of doing business.
At the same time, we have a broad set of systemic errors made by the two much larger competitors, Moody’s and Standard & Poors. These two firms, by design, gave triple AAA ratings to piles of junk paper. They did so because that was what they were paid to do by the underwriters.
via SEC Pursues Egan Jones; Moody’s, S&P Remain At Large | The Big Picture.
