Wednesday, March 18, 2009
Short And Sweet
The Federal Reserve Bank knows what the problem is. Before the domestic economy of the United States stops declining and starts to move in a positive direction, the flow of credit for housing, education, credit cards and cars must be growing not contracting. The Fed's answer is to buy $300 billion in debt. Whether this will work, I am not sure, but I can tell you that this is not a long term solution to the problem of credit in the United States. At some point, the powers that be, whether it is the Federal Reserve Bank or the Congress, must bite the bullet and deal with the credit rating system that is a complete failure. I have written about this almost every day, and I will continue to write about this until I see a comprehensive solution to the credit rating agency problem. Without credit ratings, there is really no effective debt markets. At this point in time, the CRAs have no creditability. I have repeatedly called for the Federal Government to take over this responsibility much the same way government checks the weights and measures in commerce. At some point, perhaps the people in charge will wake up to the fact that without a creditable credit rating agency system, there will continue to be a problem in the re-establishment of the debt markets for doing business in the 21st century.