- Is the proposed application of the rule to prospective credit ratings, i.e., credit ratings that are initially determined on or after June 26, 2007, appropriate and do commenter’s believe it would provide meaningful information if the rule was limited to credit ratings made on or after that date? Should the Commission adopt a final rule that uses another date such as the date the Rating Agency Act was enacted? If June 26, 2007 is the appropriate date, how long would it take for NRSROs to build up ratings history information to permit meaningful comparisons between NRSROs? What are the advantages and disadvantages of applying a disclosure rule on a prospective basis?
The most significant financial crisis of our country since the Great Depression was due in part to the substantial misrating, by the major NRSROs, of mortgage backed securities and the structured products that bundled those securities . It is essential that the history of these ratings be exposed to academic and market scrutiny. There is important information embedded in these rating histories that correlated with pricing data and news accounts will help regulators, academics, investors, smaller NRSROs and other market participants understand the frictions and misjudgments that created this crisis.
Although we cannot recommend a specific date for ratings histories to be included in this rulemaking generally cohorts that include the 2005 underwriting vintage would be useful. As the Commission has stated the vast majority of ratings were generated by the major, issuer paid NRSROs and it is their performance which should be especially subjected to scrutiny.
- Should the Commission adopt a final rule that applies retrospectively to all outstanding credit ratings? Commenters should explain the benefits of retrospective application and how they would justify the costs.