Senate Investigation of rating agencies in the
aftermath of Enron
After holding extensive hearings, The US Senate Committee on
Governmental Affairs on October 8, 2002, issued a report "The US Financial
Oversight of Enron: The SEC and Private-Sector Watchdogs". Section II
relating to "ENRON AND THE
CREDIT RATING AGENCIES" is extracted here for you. The extract is 31
pages long; so watch
out before pressing the print key. Answer the following questions based on
the report. Another article:
Is Enron
Overpriced - Mar 05 01 - Fortune may also be helpful.
Please restrict your answer to a total of 2 pages for all questions together.
According to the Senate
Report
1. What is the NRSRO? Where do NRSRO ratings play explicit roles in
financial contacting ?
2. What is the "haircut" rule?
3. Could the NRSRO use non-public information legally?
4. How do the rating agencies generate revenue?
5. According to the Senate, the raters, "Despite their stated goal of assessing
long-term corporate strength", were doing what with respect to Enron?
6. If you got a chance, what questions would you ask S&P’s primary Enron
analyst, Todd Shipman?
7. What are credit rating triggers and how do you think Enron's management and
the rating agencies handled them?
8. What accusations does the Senate make regarding the agencies’ analyses and
actions regarding their rating of Enron?
9. Did any financial analyst or reporter have doubts about Enron before
October 2001? |