Yesterday I brought attention to the fact that Congress knew of the problems with the credit rating agencies as far back as January 2003. Most likely, Congress knew about the conflict of interest issue with the credit rating agencies much before 2003. But, even with the financial crisis and the bond market meltdown, and now a few books are coming out about the economic and financial events over the last few years, the issue of the credit rating agencies remains like the fine print at the bottom of a credit card contract, ignored by nearly everyone. A few have talked about this on some TV news programs, but we have heard nothing from this administration about changing the present system.
I, in prior posts, have gone into the problem in detail and even given my solution, which is to make the Federal Reserve Bank the issuer of the triple-A rating. When you dig into the importance of the triple-A rating as it relates to banking regulations, you see that the Fed itself places significant importance on institutions holding securities with the triple-A rating. If, holding triple-A credits in an institution's portfolio is important to how the Fed views the stability of banks, and their ability to function and carry out their responsibilities to their customers and their community, then should not the Fed have control over the issuing of that triple-A rating? It is my opinion that the Fed must have control of the triple-A credit rating if our system of banking is going to be able to withstand a future financial crisis.
Far too few understand, or, possibly even care, about what this credit rating issue is all about, but I can assure all of you that without a credit rating system with integrity, the economic recovery that the Obama administration is working for, will not take place in the near term. Far too many investors and professional portfolio managers have been burned by the structured financial products that came out of Wall Street. The market for these bonds was the entire world and the world will be much more careful where they invest their money in the future.
Stay tuned.
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2 comments:
Jim Cramer had a guest on his program yesterday who had just written his 2nd book about the collapse. He has one chapter devoted to credit agenices. When Cramer asked what was currently being being done to prevent this credit rating problem again, his reply.......
I don't understnad why no one in Washington is addressing this problem....this was one of the main leaders in the economic collapse.
Someone or some group in Washington is protecting those fuckers. Everyone that knows anything about the meltdown of the mortgage-backed bond market knows where the leak was. The big three credit rating agencies must have some kind of political power.
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