Mark, I haven't read the entire report but
the professor's comments are well written
and scare me because although I never
invested in Enron, I have other investments.- Mephisto
"Finally, and perhaps most importantly, the three major credit rating agencies - Moody's, Standard & Poor's, and Fitch/IBCA - received substantial, but as yet undisclosed, fees from Enron. Yet just weeks prior to Enron's bankruptcy filing - after most of the negative news was out and Enron's stock was trading at just $3 per share - all three agencies still gave investment grade ratings to Enron's debt. The credit rating agencies in particular have benefited greatly from a web of legal rules that essentially require securities issuers to obtain ratings from them (and them only), and at the same time protect those agencies from outside competition and liability under the securities laws. They are at least partially to blame for the Enron mess.
An investment-grade credit rating was necessary to make Enron's special purpose entities work, and Enron lived on the cusp of investment grade. During 2001, it was rated just above the lowest investment-grade ratio." |
