Senate Group Examines Credit-Rating Firms

Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, which control 95% of the credit-rating business, are neither monopolistic nor too close to the companies they rate, company executives told Congress on Tuesday.

The three, the only U.S. rating companies designated by the Securities and Exchange Commission as Nationally Recognized Statistical Rating Organizations, are usually paid by companies they rate and sometimes sell consulting services to those customers, said Sen. Richard C. Shelby (R-Ala.), chairman of the Senate Banking Committee, at a hearing in Washington.

“It’s a sweetheart deal for you all, isn’t it?” said Sen. Paul S. Sarbanes (D-Md.) during the committee’s first hearing of the new Congress on the issue. Senators are considering whether to pass a law to promote competition and avoid conflicts of interest.

Company officials said they support more competition. A solution would be “either the elimination of the NRSRO or the opening of the industry to more nationally recognized agencies,” said Moody’s President Raymond McDaniel Jr.

One other company, Toronto-based Dominion Bond Rating Service Ltd., has the special status. There are about 150 credit-rating companies worldwide.