Bad Credit

Connecticut’s Attorney General is pursuing three of the largest U.S. credit rating firms who received $400 million in Federal Reserve bailout funds. According to U.S. Today, Standard & Poor’s, Moody’s, and Fitch Ratings will benefit from fees connected to the U.S. government’s $1-trillion Term Asset-Backed Securities Loan Facility (TALF).

TALF funds are intended to loosen credit markets by purchasing new securities backs by student, auto, and consumer credit card loans. According to procedures, the securities must be rated by at least two rating agencies.

In the eyes of Blumenthal and many consumers, these agencies played a major role creating the credit crisis giving lofty ratings to financial instruments that quickly melted into junk status last fall. “It is outrageous that the very firms which facilitated the credit debacle are now being rewarded for their ineptitude,” says Sean Egan, managing director of Egan-Jones, a small ratings agency. Alan Greenspan also added his approbation in October Congressional testimony saying that the companies’ unrealistically positive ratings were “at the core of the problem.“

The Obama Group has taken up where Bush left off.  Rewarding those at the center of the worst economic downturn in two generations is bad policy and bad public relations. While few in finance want to take responsibility for the  meltdown, it appears even fewer in government want to hold anyone accountable.

~ by deadmanscurve on April 7, 2009.