On Thursday, May 13, 2010, the U.S. Senate took steps to overhaul the credit-rating agency business, which is widely maligned for its role in the 2007-2009 financial crisis. An amendment by Democratic Senator Al Franken passed for a government clearinghouse to be set up to assign debt rating duties to agencies, with federal regulators developing their own standards of credit-worthiness rather than relying solely on credit rating agency assessments. In a subsequent vote, lawmakers approved a separate amendment by Sen. George S. LeMieux (R-Fla.) that would remove the government’s stamp of approval for a select group of ratings agencies as the standard for credit worthiness.
1. Who are the main credit agencies that controversial bill was aimed at?
2. This bill is being touted as the biggest overhaul of financial regulation since the Great Depression. What regulation(s) was enacted during the Great Depression that impacts accountants to this day?
3. Briefly explain bond ratings and why it is important for an accountant to understand this concept.
CNBC. (2010) Amending FinReg, May 13 video (Retrieved online at http://www.cnbc.com/id/15840232?video=1493262393&play=1)