Friday, April 24, 2009
Why We Need Federalism-9
"Connecticut Attorney General Richard Blumenthal said he is investigating why a [Fed] bailout program will steer as much as $400 million to the three largest credit-rating agencies, saying the firms' poor performance in recent months helped cause the crisis. ... The Fed's rules for its $1 trillion TAPF program, which is intending to restart consumer lending, require financial institutions to have new securities rated by two or more 'nationally recognized staistical ratings agencies'," John Kell at the WSJ, 7 April 2009.
This illustrates why we need federalism. Which federal agency would investigate this? As to why the Big Three rating agencies will continue to get business, it's because they will do what they are told. If good ratings facilitate the sale of paper the Fed wants sold, good ratings will be given.