Subject: File No. S7-08-10
From: Karl T. Muth
Affiliation: Northwestern University

March 22, 2014

Dear Chair White,

I write in support for, reiteration of, and addendum to Representative Sean Duffy's letter dated October 4, 2013.

In particular, I share Rep. Duffy's concerns that the implementation of 939A's related contemplated regulations may unintentionally entrench the role of ratings (rather than decreasing investor reliance on ratings) and may intertwine government and the ratings business in ways that will be difficult to unwind at some future date. The transparency achieved by 939A may be confused - or even partially mitigated - by the implementation of 939F's provisions. The injection of a new layer of bureaucratic cushioning in the already-uncertain space separating ratings agencies from markets is unlikely to be helpful and will undoubtedly be difficult to manage. Though the intent of 939A remains a matter of debate, the interaction between 939A and the role of ratings more generally is deserving of further discussion and I question whether the key ingredients of 939A and 939F will prove compatible policy tools in the context of current (and future) market conditions.

Thank you for your consideration of these comments, Madam Chair, and for your decision to re-open the comment period as to this matter, which I hope will yield a more comprehensive debate as to the finer points and future implications of these proposed measures.

With kind regards,

Karl T. Muth
Lecturer in Economics and Public Policy
Northwestern University

Note: Opinions and comments and any errors in this letter are my own and may not represent the views or positions of institutions with which I am affiliated.