Bloomberg News

S&P’s New President Peterson Lobbies Washington on Ratings Rules

November 15, 2011

Nov. 4 (Bloomberg) -- Douglas Peterson, who took over as president of Standard & Poor’s in September, is already making the rounds in Washington to lobby on regulatory proposals that could cut into its credit-rating business.

Peterson met yesterday with Representative Barney Frank, the House Financial Services Committee’s top Democrat, to discuss draft rules proposed by the European Union, Frank said today in a telephone interview. He also visited yesterday with U.S. Securities and Exchange Commissioner Elisse Walter, according to a memo posted on the agency’s website.

“They don’t like some of what Europe is talking about doing,” said Frank, who represents Massachusetts. “I have no interest in being helpful to them,” he said of S&P.

Regulators globally are considering rules that could give more business to S&P’s competitors. The SEC is studying a proposal pushed by Senator Al Franken, a Democrat from Minnesota, which would create a board to match raters with assignments for structured products. The European Commission is considering a rule that would require bond issuers to rotate which graders they hire.

“We have regular communications with regulators and policymakers to discuss the efficient functioning of the capital markets and global coordination of regulation,” said Ed Sweeney, a spokesman for McGraw-Hill Cos.’s S&P unit.

The New York-based firm named Peterson, the former chief operating officer of Citibank NA, to replace Deven Sharma as president on Aug. 22. He took over on Sept. 12, the company said in a statement.

Municipal Downgrades

Frank said he asked Peterson to justify S&P’s ratings of cities and towns after S&P lowered its grades for thousands of municipal bonds following its Aug. 5 downgrade of the U.S. from AAA. The cuts are “preposterous” and impose significant additional costs on local governments, Frank said.

Peterson and Walter also discussed a series of rules proposed by the SEC on May 18 that would require more disclosures, stricter conflict-of-interest controls and new performance data, according to the memo.

“There’s an extraordinary amount of politics involved in all this,” Peter Appert, an analyst who tracks the ratings business at Piper Jaffray & Co. in San Francisco, said in a telephone interview. The Franken proposal and the rotation rule are unworkable, he said.

The EU may also ban credit-ratings companies from making assessments of nations receiving European or international bailouts, Michel Barnier, the EU’s financial services commissioner, told reporters in Brussels on Oct. 20. The European Commission will publish its proposals on Nov. 15, it said on its website.

--With assistance from Jim Brunsden in Brussels and Jesse Hamilton in Washington. Editors: Pierre Paulden, Robert Burgess

To contact the reporter on this story: Zeke Faux in New York at zfaux@bloomberg.net.

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net.


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