Wednesday, August 11, 2010
Credit Ratings & The Political-Economy 2010
We are having a heat wave in Cincinnati, and my brain is just about fried. Temperatures range from the mid 70s (night) to the high 90s (day) and are expected to hang on for several days. I have been working on getting 4 paintings ready for the juried art show at the Clifton Art Center. I must submit the actual works next week. No photographs this time, I must deliver the artwork with labels for the judges to examine. The 4 paintings are all in acrylic paint, with one from The Envelope Collection - Level Playing Field Out The Window.
Over the last 2 plus years, I have written about the political-economy and my belief in the need for a level playing field in order for our economy to run efficiently. In our economic system, the movement or flow of capital to those that wish to borrow from those that have funds to invest, permits the economy to grow and flourish. Whether it is a person buying a car or a corporation issuing a corporate bond issue, it is important that capital can flow to those that need or want to borrow. Credit ratings are a devise that permits the lender to assess the quality of the loan. Securitization permits many small loans, like mortgages, car loans and credit card debt to be bundled and sold in the capital markets to an assortment of investors. Pension funds, endowments, foundations, insurance companies and mutual funds can invest in securitized loans, and these bonds can then be bought and sold around the world. BUT, without credit ratings that have integrity, the movement of capital from lender to borrower is stymied.
All I have been writing about, is our need to have a credit rating system that has no conflict of interest between the underwriters and the credit rating agencies. It can't be any simpler. The thing, in my opinion, that is holding back the growth of our economy and putting people back to work in the private sector, is the problem of confidence in the system of credit in our country. Our bond market is the world's bond market and while there is money out there looking for fixed income instruments to invest, no one wants to buy a pig in a poke.
Level Playing Field Out The Window, acrylic on paper envelope, by: F.D. Zigler.