Executive Summary
The nation’s major financial ratings agencies derive their revenues from the very same companies they rate, an inescapable conflict of interest that hides serious financial weaknesses, encourages individuals and institutions to take excessive risks, helps cause financial collapses, and has become a recurring threat to America overall.
In this proposal, we demonstrate the urgency of establishing a national standard of independence and objectivity for all financial ratings, especially those sanctioned by the U.S. Government as nationally recognized statistical ratings organizations (NRSROs).
Thanks to its 53-years of strict independence and accuracy, Weiss Ratings is the single best model for this standard, having earned widespread praise for its track record.
In an objective, third-party evaluation of the Weiss stock ratings sponsored by the SEC, Weiss was deemed #1 in accuracy among all major Wall Street investment research firms as well as several independent research organizations.
In a separate study reported by The Wall Street Journal, the Weiss stock ratings beat those of Goldman Sachs, JPMorgan, Merrill Lynch, Morgan Stanley, Standard & Poor’s, and all other firms covered.
The U.S. Government Accountability Office (GAO) reported that Weiss’ insurance ratings beat its leading competitor, A.M. Best & Co, by 3-to-1 in accuracy.
And Christopher Ruddy, founder of Newsmax, wrote “Martin Weiss’s predictions [are] uncanny.”
These are testaments to Weiss Ratings’ long history of accuracy in multiple financial sectors, including life, annuity and health insurance; commercial banking, investment banking during the 2008 financial crisis; and most recently, in the midst of an alarming property insurance crisis, especially in Florida.
The downside of conflicted ratings is tragic: Consumers make their purchase decisions based almost entirely on cost and benefits with little regard to risks. This encourages financial companies to build out their high-risk product lines and let their reserves slide. Companies with high-risk financial profiles routinely become dominant players, leaving the entire industry vulnerable to financial collapses. Ultimately, millions of families risk losing their jobs, their retirement and even their homes; the economy is in grave jeopardy; financial markets come to the brink of collapse; and America’s national security is compromised.
The upside of a national standard for independent ratings is precisely the opposite across the board. Instead of chasing yield without regard to risk, consumers are empowered to objectively weigh the benefits and dangers of financial products, selecting those that best meet their risk profile. Consumer demand for risky product lines is never blown out of proportion, especially when the instruments are for retirement or protection. It becomes almost impossible for a company with a high-risk financial profile to become a dominant player. The economy is stable; the nation, secure.
To help achieve this outcome, Weiss Ratings proposes a national standard for financial ratings that is completely independent and devoid of conflicts of interest. This includes:
No direct payments by the rated companies to the ratings agencies for their ratings.
No indirect payments by the rated companies to the ratings agencies as a quid pro quo for their ratings.
No reliance on the rated companies’ cooperation for providing information.
No consent is required from the companies to publish the ratings.
No privilege afforded to the companies to have their ratings removed from circulation.