Monday, October 6, 2008

Write Congressman Barney Frank

To those who have read Moneythoughts over the last several months, know I have been beating the drums about the need for the rating of debt securities, bonds and notes, to be taken over by the Federal Government. The private for profit companies that presently do this important work have failed the investing public too numerous times. I have stated that the rating of debt securities, especially asset-backed bonds like mortgage bonds, is as important as the division of weights and measures is to commerce. So, On Saturday Octber 3, 2008, I wrote Congressman Barney Frank with my suggestion. One member of a group of men I get together with on Sunday morning for coffee said I need to build a grassroots movement if I really want Congress to take a serious look at my suggestion. So, I am printing my letter to Congressman Frank and asking you to write or copy this letter and mail it to Congressman Frank. If you think it is a good idea, please pass the letter on to a friend. I believe that this suggestion I am making would go a long way to improve the integrity of the bond markets.

October 3, 2008

Congressman Barney Frank
2252 Rayburn Building
Washington, DC 20515

Dear Congressman Frank:

When you rewrite the regulations dealing with securities and their transparency, please consider taking the responsibility for the rating of debt securities away from the private sector and making it a responsibility of either the Federal Reserve Bank or the Securities & Exchange Commission. For too many years the companies that give out the bond ratings have failed investors both public and private with their incompetence. Think of the rating system for debt securities as the same as you would the importance of the division of weights and measures for commerce, for in essence this is what it is for the financial markets dealing in asset-backed debt securities. Without the handing out of the AAA ratings on mortgage-backed bonds, there would have never been a housing bubble in the first place. Moody’s, S&P and Fitch are in part responsible for the air that filled the housing bubble. This one change in the rating of all debt securities would bring a renewed confidence to the bond markets not just in the United States, but around the world.

Thank you for your consideration.


sign your name

If Congress received a few hundred, maybe a few thousand, letters like this one, perhaps they would take a serious look at the way ratings are given to debt securities and why this important function should be put in the hands of a not-for-profit agency of the Federal Government.

Stay tuned.


WetPaint said...

I'll do it! Because it's a good and logical idea.

moneythoughts said...

Thanks for your support. Please pass it on to your friends, as perhaps they will think it is a good idea too. Confidence in the ratings place on debt instruments is a big part of what makes the financial markets work. When investor confidence in the rating system drys up and creditablity disappears, a meltdown in the bond marekts is the result.