The “nationally recognized statistical rating organization” system remained one of the less-well-known features of federal fifi nancial regulation until the Enron bankruptcy of November 2001. In the wake of the Enron bankruptcy, however, the media and Congress noticed that the three major rating agencies had maintained “investment grade” ratings on Enron’s bonds until fifi ve days before that company declared bankruptcy. This notoriety led to Congressional hearings in which the Securities and Exchange Commission and the rating agencies were repeatedly asked how the latter could have been so slow to recognize Enron’s weakened fifi nancial condition. The rating agencies were similarly slow to recognize the weakened fifi nancial condition.
