Credit rating firms near agreement with AG Cuomo
NEW YORK (Legal Newsline)-A group of Wall Street credit rating firms is nearing an agreement with New York Attorney General Andrew Cuomo to end an investigation into their role in the subprime-mortgage crisis.
A settlement with the Democratic attorney general would allow Moody's Investors Service, Standard & Poor's and Fitch Ratings to avoid government sanctions.
Cuomo has spent months poring over thousands of pages to determine whether investment banks withheld critical information about the home loans they were packaging into bonds to be sold to investors.
Those close to the discussions say under the likely settlement, the credit companies will not admit wrongdoing and will have six months to implement news policies, including a new fee structure and increased disclosure about the deals they rate.
Deven Sharma, president of Standard & Poor's, the world's largest rating agency, said an agreement could be announced as soon as Wednesday.
In a statement, Sharma said the agreement will "help ensure our ratings process continues to be of the highest quality."
Lynn Turner, a former chief accountant for the Securities and Exchange Commission, told The New York Times that the change would not eliminate the core conflict of interest.
"It aids transparency but it doesn't solve the problem, because the same people - the issuers - are paying for the services, as opposed to the old model where the investors paid for the services," he said. "The old model was a better model."
From Legal Newsline: Reach reporter Chris Rizo by e-mail at email@example.com.
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