Is President Obama being told the truth about the credit rating agencies and the role they played in creating the financial crisis and the bond market meltdown of collateralized mortgage obligations(CMOs)?
I can not sing like Susan Boyle, but I do have something important to say.
Where is Paul Volcker? Why have we not heard from him? Why do we not see and hear from Paul Volcker on the Sunday news shows or cable news shows during the week? We see and hear from Dr. Larry Summers quite often. We see and hear from Secretary Geithner quite often. Why are we not hearing from the man that was the Chairman of the Federal Reserve Bank during the crisis of the late ‘70’s and early ‘80’s? Paul Volcker is the man that brought us through a financial crisis before. Why is he being kept silent?
Summers and Geithner were involved in the problem before they were involved in the solution to the banking crisis. Summers has taken big bucks in speaking fees from the big banks. Geithner was head of the New York Federal Reserve bank during this crisis.
If the key to the recovery to our domestic economy is the recovery of the banking system, and the key to the recovery of credit flowing from lenders to borrowers is the banks, then why is not anyone talking about the role of the credit rating agencies to the flow of credit?
So, I come back to my first question: Is President Obama being told the truth about the role of the credit rating agencies and the role they play in reestablishing the flow of credit?
99.999% of the people out there do not know what I am talking about, and it is because even the President is not an expert on investment banking and the bond market for structured debt obligations that this issue, in my opinion, is being kept from him by his advisers. Why are they keeping the truth about the role the credit rating agencies play in the process of the creation and flow of credit?
This is my paranoid answer. I believe that the investment banks on Wall Street do not want the game changed. The investment bankers have a vested interest in seeing to it that the credit rating agencies remain in the hands of the corporations that run them and that they not lose their responsibility for rating credit obligations such as notes and bonds and commercial paper. The conflict of interest that exists between the investment banking firms and the credit rating agencies preserves for the investment bankers the ability to shop credit ratings and, the bottom line, make money off the BUY side. Taking advantage of the BUYERS of structured debt obligations IS where the big money is made, and the investment bankers want that business to remain untouched.
My question is: Can the BUY side be fooled all of the time? I doubt it. At least not so soon after being abused by the SELL side before this last financial crisis.
Even a very bright and intelligent President Obama, with a law degree from Harvard, can not know all the details of the credit markets. The President must depend upon his advisers and what they are telling him. What are they telling him about the need for change in the credit rating agencies and the way they affect the flow of credit here in the United States and around the world?
Stay tuned.
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2 comments:
They probably aren't telling him anything about the CRA's. They either don't recognize the importance of the CRA's - or they don't care - or they have a 'vested' interest in perpetuating the status quo. None of which bodes well.
I have again copied today's post and mailed a hard copy to President Obama at The White House. Perhaps one of these days, one of my letters will be read and get through to the President.
You are right on the money about Wall Street wanting to maintain the status quo. Underwriting bond deals is a very profitable piece of business, and those that get that business will do everything and anything under the sun to maintain that business. This is hard ball with the hardest of hard balls.
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