Following the financial meltdown in the fall, share prices of major rating agencies are now moving sideways.   Negative attitudes towards the rating agencies still prevail although the focus of attention is now shifting to the Securities and Exchange Commission (SEC). 

Critics maintain that financial illiteracy by Security & Exchange Commission (SEC) staff was the cause of the failure to detect Madoff’s fraudulent investment activities.  The SEC also failed to prevent irresponsible lending and large scale misrepresentation in the subprime mortgage origination process. 

BIIA has always maintained that in the value chain of getting financial instruments to markets there are many participants, not just the rating agencies and consumer credit information companies.  It has become evident that information or the lack of it was not the cause of the debacle.  Available information tools were not properly utilized, fraud alerts were ignored, information falsified or misrepresented. 

The serial blunders of the SEC raises the question about who will regulate the regulators, their qualifications and level of compensation.

Failure in information sharing:  The World Bank is propagating the use of information sharing to prevent major losses in the financial system.  Consumer and business information services are based on such principles. 

It is therefore shocking to note that major financial institutions had reservations in dealing with Madoff, but did not share their findings and suspicions with regulators.  Perhaps the financial services community will learn from this affair and return to the virtues of information sharing. 

Failure in information sharing:  The World Bank is propagating the use of information sharing to prevent major losses in the financial system.  Consumer and business information services are based on such principles. 

It is therefore shocking to note that major financial institutions had reservations in dealing with Madoff, but did not share their findings and suspicions with regulators.  Perhaps the financial services community will learn from this affair and return to the virtues of information sharing.

After the meltdown there are signs of recovery.  Fair Isaac and infoGroup (former InfoUSA) experienced a more encouraging improvement in shareholder value, followed by Experian. 

Based on Q3 results, consumer information services (credit and marketing) continue to suffer the effects of the prolonged lending freeze.  Experian organic growth is flat.  Equifax’s revenues for consumer information services, which make up 50% of its total, are down by 10% from the previous year.   Fair Isaac reports difficult trading conditions and declined to provide guidance for the remainder of 2008.

BIIA Newsletter November 2008 Issue