Saturday, June 26, 2010

Saturday Is For Art & The Robbers' Stamp of Approval

It appears that the new legislation designed by Congress and the lobbyists to prevent another financial crisis, (at least prevent one for a few years), has left the problem of conflict of interest between the bankers that underwrite the new bond issues and the credit rating agencies that place a bond rating on the new bond issues, unchanged. Thanks Congress for standing up for the investor in this struggle. We know that we can always count on the Congress to favor the money interests when push comes to shove, and as a result, what happens is that the Congress usually shoves it up the peoples' ass.

What am I talking about? For those that have not taken my course in Bond Underwriting 101, let me explain. The three largest credit rating agencies are paid by the bankers that bring the securitized mortgage-backed bonds to them for their rating. If the banker is informed that the new bond issue will not be given a triple-A rating, which by the way is the highest rating given and means that there is little risk or chance of default, then the banker can "shop" the rating to another credit rating agency in pursuit of that triple-A rating. Congress in her wisdom could not see a problem with the existing structure and made no change in the way the bankers and credit rating agencies do business. In other words, it is business as usual and the conflict of interest remains.

Back in the 1980s, Congress thought it smart to let savings & loans invest in other investments besides mortgages and a number of them invested in "junk bonds" (also referred to as high yield bonds). Several savings & loans went under because they did not understand what they were doing. In the early 1990s I painted a stamp to commemorate the savings & loan fiasco. Since Saturday is for Art, I thought it would be appropriate to post this painting. Congress in its wisdom, spell that money in their pockets from lobbyists working for the family, has given the thieves license to continue to mint bogus triple-A bonds and in doing so, set people up to lose their money. Congress permits the robbers to use the flag as their mask as only Congress can.

Stay tuned.


Cloudia said...

You are SO right!

Come to the beach:

Aloha from Hawaii

Comfort Spiral

moneythoughts said...

Are you inviting me to Hawaii? or some other beach?

Glad you agree with me on the conflict of interest issue.