CREDIT RATING AGENCIES AND THE FINANCIAL CRISIS ...

92Mr. FONS. No, it doesn’t surprise me. I personally met with folksat PIMCO and they are eager to express their opinions about howthey think the ratings should be run and how we should be doingour business. So this doesn’t surprise me at all.Ms. WATSON. This e-mail described a similar call from an investorfrom Vanguard, which is one of the Nation’s leading mutualfund companies. According to the e-mail, Vanguard expressed frustrationwith the rating agency’s willingness to allow issuers to getaway with murder.And so again, Mr. Fons, why would Vanguard say credit ratingagencies allow people to get away with murder?Mr. FONS. They are addressing the rating shopping issue, theerosion in standards that were obviously clear to them and clearto many others in the market. And the delay by the rating agenciesto adjust their methodologies and ratings accordingly.Ms. WATSON. I want to read three more lines and they are upon the screen. Vanguard reports it feels like there is a big partyout there. The agencies are giving issuers every benefit of thedoubt. Vanguard said that portfolio managers at Vanguard beganto see problems in the work of the rating agencies beginning about18 months ago. At first, we thought that these problems were isolatedevents. Then they became isolated trends. Now they are normaltrends. And these trends are getting worse and not getting better.So Mr. Egan, down at the end, what do you make of this e-mailand do you agree that these isolated events turned into worseningtrends?Mr. EGAN. It is not at all surprising. In fact, we argued that thecurrent ratings system is designed for failure and that’s exactlywhat we have.Ms. WATSON. I want to thank you particularly, Mr. Egan, becauseyou have been one of the clearest speaking people that wehave had up here since we have been looking at the collapse of themarket. What we need is plain English to try to unscramble theseeggs that we find ourselves in and they are rotten eggs at thistime. I appreciate all the panel being here and I appreciate clearresponses that the public out there can understand. Thank you,Mr. Chairman.Chairman WAXMAN. Thank you, Ms. Watson. Mr. Lynch.Mr. LYNCH. Thank you, Mr. Chairman. And I also want to thankthe witnesses.I also have the dubious honor of serving on the Financial ServicesCommittee and in our hearing yesterday, I began my remarksby saying I wasn’t interested in assigning blame or responsibility.And that I was more interested in hearing about how we might goforward and build a regulatory framework that would actually bereliable and would secure the markets. That was the FinancialServices Committee.This is the Oversight Committee which actually, in my opinion,does have a responsibility to identify those who are responsible andto hope in a way to hold those people accountable. It is a fact thatMoody’s and Standard & Poor’s especially as rating agencies helda position of trust in relation to investors and market participantsand over time over the past 75 years or so investors and marketVerDate 11-MAY-2000 12:35 Aug 24, 2009 Jkt 000000 PO 00000 Frm 00096 Fmt 6633 Sfmt 6633 U:\DOCS\51103.TXT KATIE PsN: KATIE