Get Something For Your Money

I have not read or heard of any changes in the credit rating agencies (CRAs), and this is a big disappointment. Without understanding the role the CRAs played in the financial crisis, and more specifically in the bond market meltdown, the Obama administration is not dealing with the economy, credit and investing in a forth right manner.

Whether President Obama himself understands the role that the CRAs play in the movement of credit from borrower to investor is hard to say. But, the men and women around him should know the role the CRAs played in creating the financial crisis and the eventual bond market meltdown of mortgage-backed bonds. Doing nothing will almost certainly mean a slower economic recovery because investors and the large pools of cash (pension funds, etc.) will be more careful where they invest their fixed income money now.

The idea that banks should hold onto a percentage of the bonds or mortgages they make is a so so idea. There are ways around it, and if not, I am sure the banks will finds ways to circumvent the intent of the rules. But, we should not be surprised that the banks and the CRAs will go back to their old ways in a short time. They, Wall Street, did not spend all those millions of dollars on lobbyists to talk to our Congress and not get something in return for their money.

Stay tuned.