Thursday, April 15, 2010

Bond Credit Ratings Have To Hold Water

It is simply amazing how bad so many people are being fooled and taken in by what the Republicans in Congress are saying about financial reform. I think, if it was almost anything but financial regulation that we are talking about, that the deceit could not be pulled off with such ease. Making a calculated bet that even with TV news and cable news programs lighting up the screen with a rebuttal to the Republican's outlandish assertions about the financial reform legislation, that because so many people do not understand what is taking place that they can get away with saying, "up is down", "black is white", and needed regulation that would help prevent "too big to fail" would do just the opposite.

If the Republicans in Congress can pull this off (their opposition to financial reform legislation), they should be given an Oscar, an Emmy, and a Nobel Prize for Bullshit. They are the masters of deceit!

The economy is showing signs of coming back. However, the housing problems that were, in my opinion, at the center of the financial crisis have not been settled. Give me one week, and the power to clean up the credit rating fiasco that masquerades as our credit rating system, and I will have the housing market moving in the right direction again. The creation of mortgage-backed bonds is a legitimate way to finance our housing needs, but the credit ratings that are placed on these bonds must mean something. When they mean nothing, they undermine the whole system of financing housing. Toxic assets are mortgage-backed bonds that are not worth the paper they are printed on. (I know, they are not printed on paper anymore, that they are in book entry form, so give me some literary license.)

Bottom line, fix the credit rating agencies and the flow of credit can once more begin. However, the Triple-A rating must mean something this time around. That is why the Federal Reserve Bank should pass on the validity of all Triple-A ratings before they are brought to market by the underwriters. The use of mortgage-backed bonds can work to bring back the housing market, but this time the bond credit ratings have to hold water.

Stay tuned.


moneythoughts said...

I glossed over a lot of information dealing with bond credit ratings because I have written about this aspect so many times, and I thought I would save people the time of plowing through it again.

If anyone wants to read in detail about my ideas about bond credit ratings, etc, etc. Please check out my earlier posts on this blog.

Cloudia said...

Aloha from Waikiki

Comfort Spiral

Julie Schuler said...

I watched a little bit of C-Span yesterday. The Republican du jour, I don't even remember who it was, was warning that regulating derivatives would drive jobs over seas.... when were they ever worried about that? Not when the steel industry folded up and took my father's job, certainly not then. I think the recession sucked away multiple times more jobs than regulation would have done.

moneythoughts said...

Julie, you are so right again. See Friday's post, as I am sure you will. It is worth reading.