Al Franken: “I rise to speak again on the problem of credit rating agencies and the inherent conflicts of interest that drive the…”

“I rise to speak again on the problem of credit rating agencies and the inherent conflicts of interest that drive the industry. The underlying Wall Street reform bill takes some steps in the right direction, but I believe we can go much further in addressing the fundamental problem--the opportunity to shop around for the highest rating. Currently, a bank that issues a security can shop its product around to one of the three biggest credit rating agencies--all three of them--seeking out the highest possible rating. The credit rating agency promising the highest rating will get hired. This process ensures that the credit rating agency will not just be evaluating the risk of the financial product, it will be weighing its own business interests when offering up a rating. If the agency hands out a AAA rating, the customer will come back again; the banks will come back again. That incentive affects the ultimate rating the product receives. This ratings shopping leads to major conflicts of interest, and it was one of the major causes of the financial meltdown.”