Freda Johnson's suggestion in the July 22 Guest Words that rating agencies are facing a diminished role in the capital markets strikes out on these facts.

Her assertion that ratings must fall into a predetermined distribution of rating categories is nonsense. This implies that rating agencies like Standard & Poor's Corp. will avoid assigning some ratings if they do not fit a preconceived formula. Such an approach would lack analytical credibility.

Ms. Johnson argues that under the Tax Reform Act of 1986, municipal issuers became less able to pay rating fees. In reality, rating fees represent only a minuscule percentage of the total fees issuers pay, and Standard & Poor's market share of municipal bond issues has grown considerably since 1986.

Central repositories of public data would not make rating agencies unnecessary. The fact is that Standard & Poor's and other rating agencies add value to this public data through comprehensive analysis of both public and proprietary issuer data, much of which would not be available to investors under current repository proposals.

Standard & Poor's supports calls for greater disclosure which can only enhance the credibility of our rating assessments. However, simply making information available in a central repository does not put individual investors in a position to perform the analyses Standard & Poor's can perform.

There is a large and knowledgeable analytical body outside the rating agencies. This is not new. It's been true for many years. Bond insurers, among others, have substantial analysis capability. However, they have fundamentally different interests at stake and do not share their research with investors in the same manner that Standard & Poor's and other agencies share their opinions.

We strongly believe bond insurance has played an important role in the capital markets. However, Ms. Johnson is wrong in suggesting that such insurance should replace the extensive expert opinion and financial analysis provided by rating agencies.

That approach would mean, ultimately, less information being made availabe to investors. In any event, we think the fact that Global Guaranty magazine ranked Standard & Poor's as the number one municipal analytical team speaks for itself.

Structural changes in the markets certainly are creating challenges for rating agencies. Clearly, Standard & Poor's has adapted to tumultuous changes over the 70 years we've been providing analysis. But are individual investors and institutions prepared to begin rating the credit quality of their own investments? We don't think so.

To the contrary, investors increasingly are expressing their credit quality concerns by urging issuers to obtain agency ratings for their transactions. That's why Standard & Poor's quantitative analytical expertise and our qualitative knowledge of individual issuers will continue to play an important role in the capital markets.

Vickie A. Tillman Executive Managing Director Municipal Finance Department Standard & Poor's Corp.

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