No Reform for Credit Ratings Agencies

We all are aware that credit ratings agencies played a major part in the financial meltdown. So, naturally one would expect to see major reforms originating from Congress.

Not only is this ignored in legislation that has any chance of passing, the New York Times is reporting we never will.

When the financial crisis began, few players on Wall Street looked more ripe for reform than the Big Three credit rating agencies.

It wasn’t just that Moody’s Investors Service, Standard & Poor’s and Fitch Ratings, played a crucial role in the epochal housing market collapse, affixing their most laudatory grades to billions of dollars worth of bonds that went bad in the subprime crisis.

It was the near universal agreement that potential conflicts were embedded in the ratings model. For years, banks and other issuers have paid rating agencies to appraise securities — a bit like a restaurant paying a critic to review its food, and only if the verdict is highly favorable.

So as Washington rewrites the rules of Wall Street, how is the overhaul of the Big Three coming? It isn’t, finance experts say.

According to the article, the reason credit ratings agencies are getting a free pass is not due to lobbyists (right), but due to the lack of consensus on what reform should be.

Gee wiz, oh nothing is going to happen so just give up? At least Senator Dodd's bill has an office to monitor credit ratings agencies. How about examining proposals in congressional testimony, or listening to whistleblowers?

Naked Capitalism has more:

First, this discussion promotes the misconception that ratings agencies don’t lobby. They do, but not through the usual hired guns, who work on Congressmen. The rating agencies lobby quite effectively… the regulators. And since the regulators aren’t keen (and stress the central role of ratings) that makes Congress cautious.

But more important, the article fails to draw the distinction between rating of structured credits, which is where the big fees came from and where the abuses occurred, versus rating traditional products, like corporate bonds, commercial paper, and municipal debt.

Dean Baker has a simple proposal, do not let companies choose the credit rating agency for their product. This might work, except there are really only 3. Of course having a 3rd party choose a ratings agency might also help bust out the monopoly of the big three.

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If no RICO investigation then maybe more states will

sue the rating agencies for fraud. I am convinced more than ever that we will not get any serious regulatory reform out this congress. Melissa Bean and the New Democrats are at it again in the House submitting all kinds of amendments that would further weaken already weak legislation. - Financial Information for the Rest of Us.

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Wall Street wins another round

It's going to take a complete economic meltdown to change things in Washington. Right now things look awfully familiar.

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same song, different verse, little bit louder, little bit worse

Is this image from 1897 or 1880, etc. when we had....gee wiz, why does this sound so familiar, JP Morgan running the nation's finances?

It was only through Presidential action, that being to me, two stand outs, Teddy Roosevelt and FDR to break up the strangle hold of big finance, corporations running America.

Of course more and more it's looking like Obama is a corporate puppet. Sorry, but that's what it is looking like to me.

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