Fool Me Twice

They’re back and ready to do it again. The same credit rating agencies, Standard & Poor’s, Moody’s, and Fitch, which did such a fine job of rating the risk of mortgage backed securities now have a monopoly on rating collateral being used in the Fed’s commercial paper lending program and Term Asset-Backed Securities Loan Facility. The Fed has determined that it will only accept collateral that has been appraised by the one of the “major” (read big three) rating agencies. This leaves out seven rating agencies that have recently been recognized by the SEC.

The banks and their managers have been raked over the coals for bad business decisions based on the ratings that the big three provided but I haven’t heard of rating agency executives being held to account for their disastrous risk assessments. I also haven’t heard of any justification why the leaders of our most critical financial regulatory bodies now believe in the assessments from the very people who drove the economy over a cliff.

Fool me once, shame on you. Fool me twice, shame on me…