Bankruptcy

Rating Agencies on Strike

By Adam Levitin

I thought that this story about the rating agencies' response to the financial reform bill received far too little attention. The rating agencies are refusing to rate until and unless they are relieved of their newly acquired liability for their ratings. In the meantime, the ABS markets can't function, which hurts not only the rating agencies, but also ABS issuers. Clearly the rating agencies are counting on the issues to plead their case before Congress. Smart strategy.  

We're going to see a lot of examples in the next couple years of industries in turmoil because of Dodd-Frank. I don't think Congress really worked through all of the rating agency issues thoroughly enough; it's clear that there's a problem, but finding the right solution is much more difficult. 

Full post as published by Credit Slips on July 23, 2010 (boomark / email).