Annals of regulatory emasculation, ratings agency edition

By Felix Salmon
October 20, 2009
Reuters is reporting today that Congress has "watered down" the bill regulating the ratings agencies. What's unclear is whether there's anything left at all:

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Reuters is reporting today that Congress has “watered down” the bill regulating the ratings agencies. What’s unclear is whether there’s anything left at all:

  • References to the ratings agencies and their ratings will still appear in federal law, which means that the agencies will still carry the federal stamp of approval which was so good at making investors altogether too comfortable with them.
  • The ratings agencies can’t be held liable for ratings based on other agencies’ ratings, in multi-tiered structured products. (I think that’s what the story is driving at, anyway, let me know if it means something else.)
  • The ratings agencies will still be able to rate companies where one of their own employees has just started work.

In terms of regulatory reform, it’s clear which way the wind is blowing, it’s clear that we’ve wasted our crisis, and it’s clear that even if we forced lawmakers to read all 600 pages of the new Sorkin book, they’ve lost any and all fire in the belly when it comes to trying to ensure we never have another one like it. Meanwhile, the ratings agencies are giggling, and the industry is so profitable that new entrants are trying to muscle in. Nice work if you can get it, I suppose.

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