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Assertions that we compromised our analytic integrity for business considerations (“Franken urges new rules for rating agencies,” Feb. 15) are simply false. We deeply regret that our CDO ratings failed to fully anticipate the rapidly deteriorating conditions in the U.S. mortgage market in the time leading up to the financial crisis.
But there was robust internal debate within S&P about U.S. housing, and we applied the collective judgment of our committee-based system in good faith. S&P’s ratings were based on the same subprime mortgage data available to the rest of the market — including U.S. government officials, who in 2007 publicly stated that problems in the subprime market appeared to be contained.
With regard to the issuer-pays business model, we strongly believe that it provides the greatest transparency to the market by making public ratings available free of charge to everyone, avoiding selective disclosure. S&P has used the issuer-pays model since the 1970s, when the Penn Central Railroad bankruptcy demonstrated the need for greater transparency and availability of credit ratings.
The policy of the U.S. government is to reduce mechanistic reliance on ratings by eliminating references to credit ratings in certain regulations. We emphatically support that policy. An oversight board to assign ratings could have the unintended consequence of leading investors to think ratings are endorsed by the government.
Paul A. Coughlin, New York
The writer is executive managing director of global analytics and operations for Standard & Poor’s Ratings Services.
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In response to the Feb. 19 letter writer who questioned how the Minnesota Orchestra is managed compared to the Guthrie, it is true that different traditions exist in the symphonic world as opposed to the theatrical one.
Most theaters hire their performers on a show-by-show basis, which gives theater administrators a great deal of flexibility in managing overall costs. Most major American orchestras (including the Minnesota Orchestra) offer musicians year-round, tenured positions with very sizable compensation packages.
This means orchestra managers have less flexibility in managing overall costs — except at the time of a contract negotiation — but symphony musicians benefit from stable continuous employment. It is highly uncommon for a nonprofit theater to offers its actors a salary and benefit package totaling $120,000 a year. This is the current offer on the table for Minnesota Orchestra musicians.
If orchestras were to adopt advice from the theatrical world, it might very well benefit the orchestra’s financial bottom line, but it probably wouldn’t be to the advantage of individual musicians.
ROBERT NEU, Minneapolis
The writer is general manager of the Minnesota Orchestra.