Thursday, 20 October 2016
Last updated 18 hours ago
Sep 17 2009 | 2:04am ET
Activist hedge fund honcho William Ackman is joining the piling-on of credit ratings agencies in the wake of a potentially devastating court decision.
The Pershing Square Capital Management chief said that much of the blame for the credit crisis can be laid at the feet of the ratings agencies, and recommended that any overhaul of the financial system make stricter regulation of them a top priority.
Ackman went even further, saying ratings agencies should have their feet held to the fire for their role in building up the credit bubble. The hedge fund manager said they should face more liability for their ratings, a reality that for the agencies that may be coming sooner rather than later. Earlier this month, a federal judge ruled that ratings agencies do not enjoy the absolute protection of the First Amendment for ratings with limited distribution, in a case sparked by the failure of a structured investment vehicle set up by hedge fund Cheyne Capital.
“They won’t be as profitable, but they’ll be a lot more careful,” Ackman predicted at a conference in Washington, D.C.
Always the optimist, Ackman said there was a silver lining to the failure of the ratings agencies.
“The best thing of all this is that the triple-A is meaningless, and I think it will cause people to do their homework,” he said. Many of the subprime mortgage-backed securities that precipitated the credit crisis enjoyed the highest ratings from the three dominant ratings agencies, Fitch Ratings, Moody’s Investor Services and Standard & Poor’s.