How on Earth do the new massive financial regulatory changes not address the @#$%&* ratings agencies
I have been blasting the ratings agencies here for what seems like years for being a major contributor to the financial mess that we find ourselves in today yet not being penalized one iota for their misdeeds. The Big Picture's Barry Ritholtz has a similar opinion on this matter. I love the rant that he had on the subject today. As an added bonus, he slipped a "WTF" into his tirade, which always makes me laugh for some reason.
Who in the heck did the people at the ratings agencies pay off? How has there not been a major change to the system in which the people that issue bonds are the ones that pay for the "ratings" and that government regulations mandate that ratings from officially recognized agencies be used by many institutions to determine what they can and cannot buy yet prevent competition in the sector? What a racket. No wonder Moody's is so profitable. I absolutely cannot stand those guys.
Someone with a reasonably big name, like The Motley Fool, should start its own truly independent ratings agency. If it was done right, I'm sure that there would be a huge demand for unbiased research on this subject. Heck a bunch of the smart folks that hang out here at CAPS could put their collective heads together and come up with better ratings for companies and bonds than the idiots at S&P, MCO, and Fitch have.
Obama Reform Plan Fails to Fix Whats Broken
This is a giant WTF from the White House. It implies that the team in charge STILL does not understand how the problem occurred.
The ratings agencies are not the only bad actors, but they are a BUTFOR – but for the rating agencies putting a triple A on junk paper, many many funds could not have purchased them, the number of mortgages securitized would have been much less, the insatiable demand on Wall Street for mortgage paper would have also been much lower.
Why is this important? If mortgages originators couldn’t sell a mass amount of loans, they would not have had the need to give a mortgage to anyone who could fog a mirror — and that means no Liar Loans, no NINJA loans, and no huge subprime debacle.
Better Solution: Take apart the ratings oligopoly! Eliminate the Pay for Play/Payola structure. Strip Moody’s S&P and Fitch from their uniquely protected status — they have proven they are neither worthy nor competent. Open up ratings to competition –including open source.