New at Reason: Congress Didn’t Learn Anything From the Financial Crisis

I have a new commentary out, continuing to point out errors in the Dodd bill. It is certainly the best version so far, but that is little solace when looking at mind twisting errors like the absence of credit rating agency reform. Just consider who is lined up to reform ratings agencies:

  • Barney Frank: his reform bill that pass the House get this issue moving in the right direction. Where the Dodd bill gives the SEC more oversight authority to govern the ratings agencies, the House bill eliminates the official status of the agencies as federally recognized measurers of risk once and for all.
  • The New York Times: They wrote on Sunday: “If raters are considered to be a public good, they should be financed like a public good, with a tax or other levy, and paid by the government… If there is no way to improve raters’ track record, a more drastic step would be to eliminate them, or at least eliminate the legal requirement that some insurance companies, pension funds and other entities hold assets with high ratings, a rule that gives the raters enormous quasi-regulatory power.”
  • Standard & Poors: even the president of the most storied rating agency, Deven Sharma, is in favor of the House to drop privileged status for the big rating agencies.

In the end, just as the stimulus has subtly made the real recovery process slower by interjecting a government funded end to the recession, the Dodd bill will chip away over time at financial markets. Like the stimulus, the Dodd bill won’t destroy Wall Street, but it will make us a less vibrant economically.

Read the article here: “Congress Didn’t Learn Anything From the Financial Crisis.