Senator hits debt rating firms’ role

Credit rating companies must “shoulder some responsibility” for sub-prime mortgage bonds that have sparked a crisis in credit markets, Sen. Richard C. Shelby, the Senate Banking Committee’s top Republican, said Monday.

Moody’s Investors Service, Standard & Poor’s and Fitch Ratings face congressional scrutiny for an “inherent conflict” in helping construct loan-backed securities, then issuing ratings on them, Shelby told reporters in Brussels.

“The credit rating agencies have played a central role in the sub-prime debacle,” said Shelby, of Alabama, who is visiting European officials. “They say that they are only giving an opinion. But they are also consultants to a lot of these companies that have issued this debt, and they have rated it, and that’s how they make money.”

Shelby’s comments add to pressure on the rating companies from both parties in Congress after a rout in securities backed by sub-prime mortgages spread across global markets.

Banking Committee Chairman Sen. Christopher J. Dodd, a Connecticut Democrat who is running for president, said Aug. 1 that he would propose a law to address rating firms’ conflicts of interest in providing ratings to investors that are paid for by the companies issuing the securities.

Federal Reserve Chairman Ben S. Bernanke will meet Dodd today to discuss conditions in financial markets, a spokeswoman for the senator said Monday.

Also on Monday, House Financial Services Committee Chairman Rep. Barney Frank (D-Mass.) said his panel would hold a hearing Sept. 5 to discuss “the current crises in the credit markets [and] mortgage market” and examine how U.S. consumers may be affected.