Wednesday, January 21, 2009

Dear Mr. President

President Obama
The White House
1600 Pennsylvania Avenue
Washington, D.C.

Dear Mr. President:

The recovery of our economy I know is of paramount importance to you and your administration. You have assembled a great economic team with many knowledgeable and experienced individuals. And it is conceivable that what I have to say about the rating companies is already in your sights; however, I would nevertheless like to add my two cents.

The present system of the private rating agencies is a failure and stands in the way to our rapid economic recovery. The rating system as it exists today is broken. The trust in companies that sell debt ratings for structured financial products does not exist and will not exist until this responsibility is taken over by the Federal Government. Investment bankers can not be permitted to “shop” for a AAA rating for mortgage-backed bonds, manufactured housing bonds, car loan bonds or any other debt instruments that are essential to the movement of capital and the growth of our economy.

The Federal Reserve Bank can flood the banking system with cash, but the movement of that cash, once the loans are made, is dependent upon the capital markets. The crisis of confidence is with the rating agencies. Their failure is hurting the whole movement of money from the point of purchase to the eventual point where the debt is purchased as a structured debt investment.

While there are several finer points to the capital markets that need to be addressed, the matter of confidence in the rating of debt instruments is critical to the recovery and expansion of our economy. If this important matter is not in your sights, I think it should be. The capital markets can not function without confidence and trust in the rating system.

Good luck in the days ahead.



P.S. To readers of this blog: You may send this letter to President Obama if you desire. Perhaps, if several copies of this letter are sent to The White House, one will get through, and hopefully someone that understands it, will read it.


LceeL said...

I hope more people than just me send this one on.

moneythoughts said...

Lou, I also emailed the letter to the President and The White House as well as mailed a hard copy with a stamp. At least I am trying to point them in the right direction. Whether they will do something about the farce that we call bond rating agencies is up to them, the powers that be.