Monday, March 7, 2011
The S.E.C. - Hold Their Feet To The Fire!
When you read an article like this one about the credit rating agencies, you can not help but feel that the Federal Government is broken. Even after the passage by our Congress of the Dodd-Frank financial reform legislation,our own Securities & Exchange Commission (SEC) is short circuiting the intent of the new law. The SEC is protecting less than one tenth of one percent of the population and in effect telling the remaining 99.99% of the American people to go to hell.
What is this all about? The Congress, in their newly passed financial reform legislation provided that the credit rating agencies have their feet held to the fire. In other words, they would have liability for the credit ratings that they passed out to mortgage-backed bonds issues as well as any other bond issue that they gave a credit rating. The credit rating agencies defended themselves after the mortgage-backed bond market meltdown and the financial crisis that followed by saying their credit ratings were protected by the First Amendment - free speech. If you hire expensive enough attorneys, they will argue that anything that comes out of your body is protected by the First Amendment.
So, what did the SEC do? The SEC in their wisdom suspended the liability portion for the credit rating agencies so they now can not be sued for their credit ratings on mortgage-backed bonds. Not only did the SEC give them one get out of jail free pass, but now they have taken the date off the pass and it is now good indefinitely.
Who benefits? The credit rating agencies, the big ones, benefit from this ruling by the SEC, but most importantly, the investment bankers that put the bond issues together really benefit because now they can turn the money faucet back on. Unfortunately, the system is back to square one in my opinion. The credit ratings given by the credit rating agencies are back to being meaningless again. So, this is what Washington calls progress and change you can believe in?
It is times likes these that I think a wise king is the best form of government, but unfortunately there is no guarantee that his or her successor will be as wise. Every Attorney General in all 50 states should be outraged at this conduct by the SEC. Every state sponsored pension fund, and there are hundreds of them, representing public workers like state employees, teachers, school employees, police and fire fighters stand to lose because of the actions of the SEC. Who does the SEC represent? The few credit rating agencies and their owners? The investment bankers on Wall Street that securitize loans and make them into bond issues? Or, should they represent the 99.9999% of the American people?
I keep coming back to this basic question: For whose benefit is financial reform written? It is the same question I have repeatedly asked of the bigger picture: For whose benefit is monetary policy made? One of these days, enough people will realize what is going on and people in positions of authority are going to have their feet held to the fire. But, unfortunately, in my opinion, it will not be soon enough!!!