As the Securities and Exchange Commission announced a formal review of credit-rating agencies in the aftermath of the collapse of Enron, the rating firms argued on Wednesday that Enron officials had withheld crucial details of its finances. That dishonesty, the agencies said, played a crucial role in their failure to discern Enron's problems more quickly.
The major credit-rating agencies -- Standard & Poor's, Moody's Investors Service and Fitch Ratings -- are under attack for what lawmakers in Washington say was their collective failure to detect widespread financial fraud at Enron.
None of the firms downgraded Enron to below investment grade until days before the company sought bankruptcy protection on Dec. 2. On Wednesday, analysts from the firms told the Senate Governmental Affairs Committee that they had been deceived by Enron and that had the company been truthful, it would have had a lower credit rating all along.
Enron "committed multiple acts of deceit and fraud on Standard & Poor's," said Ronald M. Barone, a managing director at that firm.
Skeptical lawmakers, however, said that more competition in the credit-rating business might be needed and that the rating firms did not use their special government-sanctioned access to financial data to ferret out the problems at Enron.
"Nobody is accusing you of malfeasance," the chairman of the Senate panel, Joseph Lieberman, told analysts from the firms. "The question is whether you were aggressive enough in using these powers you have."
SEC officials said their review would examine whether new rules were needed to increase regulatory monitoring of the firms or spur competition. That could include changing the procedures for certifying agencies as Nationally Recognized Statistical Ratings Organizations, a designation that makes the three big firms essentially the only ones that can perform certain bond ratings. Lieberman said he would await the SEC's findings before deciding how to proceed with legislation.
The rating firms are fighting to avoid any new regulation or legislation that would increase scrutiny of their research or open them to new competition.