The Securities and Exchange Commission has opened an investigation into whether the credit-rating agencies improperly inflated their ratings of mortgage-backed securities because of possible conflicts of interest, the head of the commission told Congress on Wednesday.
Christopher Cox, S.E.C. chairman, said the commission was examining whether the credit agencies had acted impartially.
At a hearing before the Senate Banking Committee, the chairman, Christopher Cox, said the commission was examining whether the credit agencies had “compromised their impartiality” when they simultaneously rated various mortgage-backed securities and provided advice to Wall Street investment firms about how to package them so as to gain higher credit ratings. The credit agencies also receive fees from the investment firms.
Mr. Cox said President Bush had instructed an interagency committee headed by Treasury Secretary Henry M. Paulson Jr. to examine the role of the rating agencies in lending practices by the mortgage industry.
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