CREDIT RATING AGENCIES AND THE FINANCIAL CRISIS ...

98You basically list out everything, which is what the rating agenciesshould have been doing in the first place. I mean, it’s not likesaying, we’ve got to come along and change a couple of things. Ifyou read the list, it’s basically saying, everything we were supposedto do we weren’t doing, and now we are going to start doing it.Which gets to the question of, you can change procedures, youcan change controls, you can change protocols, etc., but why shouldwe trust the same people who ignored these warnings to fix theproblem in a way that means it’s not going to happen going forward?So I think that’s what you’re getting at. If you could just speakto that a little more specifically, I’d appreciate it.Mr. FONS. I think that’s exactly what I meant, that you still havethe same overall incentives in place, you still have the same structures;and as you said, they should have been doing those thingsin the first place. These are not reforms; these are just doing businessproperly and doing them better.So at the governance level you need the board of directors whoare actually acting in shareholders’ interest and that interest ispreserving the franchise and preserving the reputation of the firm.And I didn’t see that happening. They weren’t interested in hiringgood businessmen and seeing a business run; and as I said, that’swhy I have advocated wholesale change at those levels.Mr. SARBANES. Mr. Chairman, my time is up. I would just pointout there is going to be huge resistance to that notion because thesame people that were part of this are going to want to say, wescrewed up, things broke down, but we know how to fix it and everythingwill be fine going forward.And we’re going to have to look past that.Chairman WAXMAN. Members of the Sarbanes family have heardthat story before. Thank you, Mr. Sarbanes.Ms. Speier.Ms. SPEIER. Thank you, Mr. Chairman.Gentlemen, thank you for your testimony. You have provided uswith a definition of corruption that I think is bone chilling. I can’tbegin to tell you how dismayed I am by what you have told ustoday.Mr. Egan, let me start with you. You said that in 2003 you alertedCongress to what was coming down. It sounds like Congressdidn’t listen to you. You don’t have to respond to that, but I wantto ask you a question today. What’s the next shoe that’s going tofall? And maybe we can listen to you this time.Mr. EGAN. People pay us a lot of money to get that answer. Basically,there’s a series. You have investment banks that are wayundercapitalized right now, investment now—commercial banksthat are way undercapitalized. You have the commercial banksthat are undercapitalized. You have the money market funds thatare in fear of breaking the buck.So basically anything that isn’t propped up by the Fed or theTreasury is going to drop, unfortunately; and what is needed—andit should drop, actually. It should drop until it reaches a pointwhere it’s sustainable.So there’s a variety—we tell our clients that the ecosystem, if youwill, in funding has broken down. Everybody connected with theVerDate 11-MAY-2000 12:35 Aug 24, 2009 Jkt 000000 PO 00000 Frm 00102 Fmt 6633 Sfmt 6633 U:\DOCS\51103.TXT KATIE PsN: KATIE