Subject: File No. S7-04-09
From: Shawn S Fahrer
Affiliation: Accounting Student, Queensborough Community College (CUNY)

March 5, 2009

The real problem with the NRSRO's isn't "lack of competition" as much as it is lack of rationality as to what the rating standards should be (and objectivity as to what a rating even means). For example, a company like General Electric (GE), with a share price hovering around $ 7.00 per share, having lost about 80% of its market value since April 2008 (from $ 38.43 at the high to $ 6.70 now) has its bonds rated "AAA" by Standard and Poor's despite its much lower value as a company.

Admittedly, a lot of other companies have lost a lot of value as well perhaps a "AAA" or a Moody's rating of 'Aaa' can't be justified for such companies even if they are otherwise 'solvent'. Yet these issue and issuer ratings don't take into account this factor (at least directly), but speak in vague generalities such as "The obligor's capacity to meet its financial commitment on the obligation is extremely strong (for AAA)" "The obligor's capacity to meet its financial commitment on the obligation is very strong (for AA)", etc. Terms such as "extremely", "very", etc. are NOT objective since they are subject to interpretation. Other rankings are "strong", "above average", etc. Again, these can be seen as SUBJECTIVE.

Until the ratings are made far more OBJECTIVE, you can have 1000 companies doing these ratings, but their value to would be investors would still be ZERO. This is what should be done objectify the ratings FIRST, then concentrate on how many companies should be in the business of doing such ratings.