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Posts Tagged ‘Wall Street’

OH-15: WSJ Slams Kilroy for Sloppy Wall Street Bill

August 3rd, 2010 Matt View Comments

This is what happens when a former organizer for the American Socialist Party gets a chance to reform markets as she sees fit. If you wanted to write a bill that was anti-stimulus, it would look exactly like this:

If politicians were as accountable as CEOs, half of them would be fired for incompetence. Witness last week’s land speed record for unintended consequences, as a liability provision in the Dodd-Frank financial reform brought new issues to a screeching halt in the $1.4 trillion asset-backed securities market.

These securities are bonds backed by auto loans, credit-card receivables and the like. Shutting down this entire market to new offerings was an amazing Congressional feat, given that the same federal government has put tens of billions of taxpayer dollars at risk to revive the same market.

The financial genius behind this section of Dodd-Frank is Representative Mary Jo Kilroy. The Ohio Democrat inserted a line in the bill that removes the exemption for credit raters like Standard & Poor’s and Moody’s from being considered “expert” advisers in judging securities offerings. This makes them closer to underwriters or accountants in vouching for an issued security, and it means that their consent is required before their ratings can be included in a registration statement filed at the Securities and Exchange Commission.

Coincidentally—and Ms. Kilroy has said this was her motivation—the provision also sharply increases the potential liability for credit rating firms. Both S&P and Moody’s cited this enhanced liability in announcing that they would not consent to participating in SEC asset-backed securities registrations. Fitch, DBRS and others followed suit.

Oops. Billions of dollars of deals were scrapped, as issuers were barred from proceeding without ratings information and the raters weren’t willing to participate. A June press release still appears on Ms. Kilroy’s website, proudly noting that her amendment “adds teeth to Wall Street reform.” Did it ever.

Ted Strickland is Wall Street to the Core

July 29th, 2010 Matt View Comments

If it was voting in Congress to expand credit to Democrat voters who had no ability to actually pay a mortgage or voting in 2005 to allow the Treasury to bailout Fannie/Freddie just a year before the housing market collapsed… Congressman Ted Strickland supported the heavy handed market manipulation which made some on Wall Street wealthy while causing the most serious recession since the Carter-years.

And while he plays to voters using his carefully crafted, aww shucks, Duck-Run persona, he has shameless taken money from the very same financial services workers he has besmirched.

Ted Strickland, you are a hypocrite:

Wall Street Reform Law, Proudly Endorsed by Ted Strickland and Lee Fisher, Is Already a Nightmare

July 21st, 2010 Matt View Comments

oh my:

The nation’s three dominant credit-ratings providers have made an urgent new request of their clients: Please don’t use our credit ratings.

The odd plea is emerging as the first consequence of the financial overhaul that is to be signed into law by President Obama on Wednesday. And it already is creating havoc in the bond markets, parts of which are shutting down in response to the request.

Standard & Poor’s, Moody’s Investors Service and Fitch Ratings are all refusing to allow their ratings to be used in documentation for new bond sales, each said in statements in recent days. Each says it fears being exposed to new legal liability created by the landmark Dodd-Frank financial reform law.

The new law will make ratings firms liable for the quality of their ratings decisions, effective immediately. The companies say that, until they get a better understanding of their legal exposure, they are refusing to let bond issuers use their ratings.

That is important because some bonds, notably those that are made up of consumer loans, are required by law to include ratings in their official documentation. That means new bond sales in the $1.4 trillion market for mortgages, autos, student loans and credit cards could effectively shut down.

There have been no new asset-backed bonds put on sale this week, in stark contrast to last week, when $3 billion of issues were sold. Market participants say the new law is partly behind the slowdown.

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