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While Y'all Were Kvetching About the Controversy Du Jour...Most Important News of the Year Happened

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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:41 PM
Original message
While Y'all Were Kvetching About the Controversy Du Jour...Most Important News of the Year Happened
The Three Big Ratings Agencies (hereinafter, TBRA) are refusing to rate asset backed bonds due to the stepped up regulations of the financial reform package. This is ground-shattering news that already demonstrates the effectiveness of the new legislation. I'm going to tell you why.

Now, if you listen to CNBC or NPR's Marketplace, this is meant to be a Very Troubling Development. You see, according to existing securities regulations, you can't sell asset backed bonds without a ratings agency stamp on it that tells buyers the TBRA's "opinion" of their risk. That's a principle of transparency. You need an "objective" third party assessment of the risk for such bonds. If one of the TBRA doesn't rate the bond, you can't sell it. So, the bond market for asset backed bonds is at a dead stop: no ratings, no sales. Full stop.

So, what's the NEW problem? The financial legislation just signed into law makes the TBRA's liable for the opinion they give on a bond. If, for example, they give a bond a very strong rating (AAA, say), and the bond turns out to be junk, and it turns out that the ratings agency was negligent in its assessment, it can be sued by the bondholders. This has sent shockwaves through the financial set, but not only because it exposes the ratings agency and forces them to be honest in their assessment of the bonds. Rather, it pinpoints the precise pressure zone in the whole asset backed securities market and forces changes all the way down the line. They are screaming bloody murder and essentially blackmailing the government precisely because the new law cascades throughout the system. Here's how.

What is an asset backed security? Very simply, it is a bond that is collateralized with some other asset, usually loans on actual, concrete property. The most famous are, of course, mortgage backed securities, but any loan will do. I was once involved in an ABS deal in which the bond was backed with blocks of 1000 loans on Mack truck rigs. So, 1000 truckers pay their loan on their rig, and that loan is packaged in a deal that "secures" a bond. If the bondholders can't collect from the seller, they have recourse to those loans. Simple, yes? The financial crisis of 2007 can be traced to shenanigans with such bonds. Imagine, for instance, if I know that 750 of those truckers are behind on payments and likely to default. I still want to sell that bond, but I have to disclose this (theoretically), which means I will get less money for the bond, because the buyers will demand a higher interest rate. If nobody cares, I can use whatever shit loans I want. If somebody looks and cares, I lose money. Obviously, the buyer should be looking and caring, but this is really buttressed by the work of the ratings agency. So, what happens when the TBRA are on the hook legally for their ratings. This happens:

1) They give accurate ratings, rather than essentially "selling" good ratings to the issuer and underwriter.
2) The issuer and underwriter, knowing that the ratings agency will post an accurate rating, are incentivized to use only good loans in their bonds, or to sell their bonds with the accurate interest rate if many bad loans are included. Therefore, they will only buy/package good loans from the originator. No more 1000 block truck loans with 750 bad loans - or, we know that these will fetch a higher interest rate, and that the buyer will have priced in the risk. No more blind tranches.
3) Loan originators will no longer be incentivized to hand out bad loans and crazy loans to unfit borrowers, since they will have to eat the losses rather than selling them up the chain to the bond packagers. If you're unlikely to pay back your truck loan, I probably won't make it to you, since I won't be able to move that bad loan, and will therefore have to eat the loss on it.

In terms of identifying a point of pressure and pushing on it to achieve systemic cascade effects, that's a pretty impressive piece of the legislation. And you know it's good for the People precisely because the TBRAs are going ballistic over it, and the propaganda is flowing free and thick from the business class. This is system changing stuff we see at work here, as anyone who has ever worked in finance and on ABS knows damn well. And yes, this is the kind of change I voted for. :-)
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BrklynLiberal Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:43 PM
Response to Original message
1. Thank you for this important lesson....
Edited on Thu Jul-22-10 02:55 PM by BrklynLiberal
and your extremely clear explanation of it.
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truedelphi Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:43 PM
Response to Original message
2. Let's keep our fingers crossed that some bad press about this
Doesn't allow the Administration to suggest to the colleagues on the Hill that some emergency session of Congress is needed.

The Bond market is stalled, the sky is falling!

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WCGreen Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:46 PM
Response to Original message
3. and how did out cracker jack media miss this Little tid bit....
Better yet, how did the republicans who hated this legislation miss this...

Or perhaps they let it slide through knowing it was the less publicized way to get to the right end...

Big KnR...
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JuniperLea Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:51 PM
Response to Reply #3
11. Because it reflects negatively on all who have been involved...
in this fiasco.
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deacon_sephiroth Donating Member (315 posts) Send PM | Profile | Ignore Thu Jul-22-10 08:43 PM
Response to Reply #3
79. because it's complicated
Our mainstream media does not DO complicated
Complicated = boring
boring = people tune out
people tune out = unhappy sponsors
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Exilednight Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:46 PM
Response to Original message
4. So what you are saying is that it is only a matter of time before the administration starts ........
back pedaling on their position.

Thanks.
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JuniperLea Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:50 PM
Response to Reply #4
9. I'm not sure how you extrapolated that bit of fiction from the OP...
What it means is the ratings agencies, those worthless thugs who rated AIG and all the derivative investment vehicles as AAA+, etc., are finally being held accountable for this mess we're in. They are refusing to do what they have been doing, rating bad investments as if they were stellar investments.

This new legislation is shining a hot, bright light on the cockroaches... and the roaches are caught and immobilized in fly tape.

Why would the administration back-peddle away from such a glorious success?
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BrklynLiberal Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:57 PM
Response to Reply #9
15. ...
:thumbsup: :hi:
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Whisp Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 04:34 PM
Response to Reply #9
37. all 3 of my thumbs up for your post, JuniperLea.
:)

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customerserviceguy Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 08:40 AM
Response to Reply #9
119. While I have not seen any signs that the administration is backpedalling
I can think of one reason why: this reform will drive interest rates up. Maybe they really do need to go up, but if that happens, the service on the federal debt is going to dwarf even the military budget, if we see rates like we saw 30 years ago.
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JDPriestly Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:03 PM
Response to Reply #119
141. To the extent that people pay taxes on interest income (and they do),
it will also slightly increase tax revenue. This would be especially true if Wall Street and CEO salaries and other very, very high incomes were subject to the tax rates that were imposed at other times when Americans wanted to pay down debt and deficits.
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customerserviceguy Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 10:19 PM
Response to Reply #141
155. High interest rates will hurt
much more than they will bring in to Federal tax revenues. Rich people can already avoid getting ordinary interest, they have at least a dozen schemes out there to disguise interest income as some tax-favored other form of income. I used to do taxes as an enrolled agent, I'm pretty aware of this.

A lot of ordinary interest income is generally earned by seniors who often don't have any other taxable income besides a small pension, many of them are in the very lowest tax brackets, if they're taxed at all.
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JDPriestly Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 10:52 AM
Response to Reply #9
133. I thought that this provision did not make it into the bill.
Maybe it was a similar provision that was rejected. This is great.
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Spazito Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:11 PM
Response to Reply #4
18. Jumping to conclusions based on.....absolutely nothing...
Hmmmm, I thought lessons were learned about jumping to conclusions without the facts over the last few days, guess not.
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Exilednight Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 05:10 PM
Response to Reply #18
43. I am basing my conclusion with the known facts .............
The three bond agencies will not recommend bonds since they have to back that claim.

This leads to a frozen bond market. No buying, no selling.

How do you unfreeze it?

And trust me, they will unfreeze it, and the big three will not be held accountable for their rating system.

They're holding the market hostage, the question is - who blinks first?
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Spazito Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:03 PM
Response to Reply #43
48. "Trust me, they will unfreeze it..." does NOT equate to facts whatsoever...
so my request for facts goes unanswered. It does, however, equate to spurious speculation based on NO facts. The OP has provided many facts seemingly ignored by you in your posts. I will take the OP's fact-based material over "Trust me" every time.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:28 PM
Response to Reply #48
52. If you'd been paying attention for the past 20 years or so..
you would know the ending of this pointless saga was already written.
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Spazito Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:40 PM
Response to Reply #52
57. LOL, still not facts in response to my question to the previous poster...
only more spurious speculation spreading beyond the initial scope to now include speculation that I haven't been paying attention for 20 years,again, without any FACTS to back up that spurious speculation/assumption.

It is becoming very amusing as well as indicative, as I stated earlier, that lessons seem NOT to have been learned by some this week, alas.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 09:27 PM
Response to Reply #57
82. Scroll down.
The fact is, the ratings agencies when on strike and the regulators rolled over.
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Spazito Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:17 PM
Response to Reply #82
143. LOL, wrong again...
scroll down.

:rofl:
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tbyg52 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:28 PM
Response to Reply #43
53. I see your point, and have thought similar things in the past.
I hope you are wrong on this one. And I hope the real meaning gets widely reported - it might help keep them from backpedaling or blinking.
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MedicalAdmin Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 07:29 PM
Response to Reply #43
63. Blink? WHo cares who blinks.
This is a bare knuckles brawl in a cage and not some poker or basketball game.

It doesn't matter who blinks first, it matters who the last man standing is. The question is do the DEMS have the cojones to go the distance?
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 08:04 PM
Response to Reply #63
66. There is no "blink" in any case
Edited on Thu Jul-22-10 08:06 PM by alcibiades_mystery
The SEC statement clearly describes the six-month period as a "transition period" precisely because the exemption from liability is finished, over, and done with. Barring a new law that repeals the repeal, as it were, the thing is happening. Indeed, the exemption from liability is dead as of now. The SEC statement waives ratings requirements for six-months, but any rating given will still be liable, and some buyers may actually demand ratings, or may have internal policies that require ratings, regardless of SEC requirements for this class of debt securities. girl gone mad wants to portray this as a showdown and some "blinking" so she can avoid the obvious: this is good policy that goes to at least one of the major issues of the collapse. Why shouldn't ratings agencies - which have become as important as auditors - have the same liability status as accountants? The law says: THEY SHOULD, and that's absolutely correct. And now they do. Since it is axiomatic for ggm that no policy coming from this administration or Congress could possibly be good, she has to find some way to get around it here, and the narrative of the "showdown" and the "blink" is her way of doing that. It's thoughtless nonsense, to say the least.
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Exilednight Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 08:22 PM
Response to Reply #66
69. Girl gone mad?
Hate to inform you, but I'm a guy and to suggest otherwise would be insult to women everywhere.

Second, how do you think the bond market will unfreeze itself? Do you honestly believe that wall street will put up with this?

Republicans will more than likely put together a bill to repeal this stipulation, and only a fool would believe that they can't get enough votes from the Democratic side of the aisle to get to 60 if they choose to.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 08:33 PM
Response to Reply #69
71. I was referring to
another poster, not you.

This will not be repealed. The six month transition period was an acceptable intervention to get the ratings agencies legal departments in order so that they fully comply with the law without exposing themselves to needless liability. I think it's a good compromise, and the legislation remains as strong and good policy.

There's not going to be a repeal of the repeal.
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bluescribbler Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 10:18 AM
Response to Reply #69
129. 60 will not be enough
They will need 67 in the Senate and 294 in the House to override a Presidential veto. Do you really think Obama will sign that piece of legislation?
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EJSTES2005 Donating Member (261 posts) Send PM | Profile | Ignore Thu Jul-22-10 08:35 PM
Response to Reply #66
74. Blinking didnt take too long : (
The Securities and Exchange Commission moved to defuse turmoil in the bond markets caused by ratings firms' refusal to allow their credit ratings to be used in deal documents.

Late Thursday the agency said it would temporarily allow bond sales to go ahead without credit ratings in bond offering documents, a move that would end an effective stalemate between ratings agencies and issuers.

The two sides had been at odds over changes enacted Wednesday in the landmark financial reform bill. The new law regards bond-ratings firms as "experts" and holds them liable for the quality of their ratings.

http://online.wsj.com/article/SB10001424052748704421304...
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Exilednight Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 08:37 PM
Response to Reply #74
75. I could say I told you so, but I'm not that kind of person.
Who am I kidding? Yes I am, and I told them so!
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EJSTES2005 Donating Member (261 posts) Send PM | Profile | Ignore Thu Jul-22-10 08:37 PM
Response to Reply #74
76. more..
The SEC's waiver will be in place for six months. But the SEC said its action doesn't change or negate the new laws governing ratings agencies that came into effect with the signing of the Dodd-Frank bill this week.

"This action will provide issuers, rating agencies and other market participants with a transition period in order to implement changes to comply with the new statutory requirement while still conducting registered ABS offerings," said Meredith Cross, director of the SEC's division of corporation finance

http://online.wsj.com/article/SB10001424052748704421304...
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 08:40 PM
Response to Reply #76
78. Translation: the law stands, ratings agencies will be on the hook, and we are NOT permenently
waiving the requirement (which they couldn't do anyway). Win for the People, and the OP stands.
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Exilednight Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 10:14 PM
Response to Reply #78
93. The OP fails. Six months now, let's wait six months and see what happens then ..........
It took one day for them to put a six month hold on the law. This just gives wall-street lobby groups six months to mount an offense.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 10:38 PM
Response to Reply #93
94. The law stands
Edited on Thu Jul-22-10 10:41 PM by alcibiades_mystery
You think it will be repealed by Congress in six months. I think not. They passed this and other stringent provisions on the ratings agencies over their vociferous and constant objections. Why the fuck would they repeal it? The actual law remains in effect, even if the reporting requirements have been suspended for what is explicitly referred to by the SEC as a transition period. The SEC, by the way, was trying to get this rescinded last year, and turned it over to Congress instead. Why? Because it is harder to repeal a law than to rescind a rule. The odds are against you here.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 11:47 PM
Response to Reply #94
103. The RA's claim they were caught off guard...
so I'm not sure about "vociferous and constant objections". I think they assumed the Senate version would pass, or maybe they aren't as concerned about the 436(g) as we might expect, for reasons which will emerge.

Look, there are lots of moving parts here. You're OP is eloquent, but a good bit of a simplification. There will be many opportunities for this to be thrown out by the courts, for new protections to be amended to another bill or for the rating agencies to find a way around the change. Alternately, they could decide to simply jack up their fees enough to cover future liabilities and proceed with business as usual.

I hope the RA's will wake up tomorrow and see compliance as in their best interests and start to clean house. I won't be holding my breath while I wait, however.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:01 AM
Response to Reply #103
105. They were screaming about this when the SEC requested comments
Edited on Fri Jul-23-10 12:01 AM by alcibiades_mystery
for in-house rescission as early as last summer, and screaming since late last year after the SEC turned it over to Congress to give it more strength (i.e,. when somebody at SEC wisely decided that getting this sumbitch legislated rather than rule-made would be the more effective route, long-term). Now, the year-plus yelling about all this says one thing: their claim to be caught off guard is nonsense, and they probably don't deserve the six month "get-your-act-together" period. But it is not unusual to dispense phase-in periods for something this drastic, so I don't see it as some kind of delaying action. This is the new law. It is good policy. I'll leave you to your pessimism on its effectiveness, but the law is in effect, and they have a hockey season to get their people ready for accountable ratings production.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 08:39 AM
Response to Reply #105
118. I don't think anything will be dramatically different in 6 months.
But, assuming the repeal withstands all of the tests it's about to be put through and the intent of the repeal is upheld, it's still unlikely to do a whole lot of good, imo. It doesn't really address the root causes of inflated ratings.

Have the goal posts really shifted so far back that this measly 2-yard gain is what passes for the biggest news of the year?

Maybe I am too jaded, but I also still hope for much better than this.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 09:14 AM
Response to Reply #118
122. You say
it doesn't address the root cause. I say it does. The difference is that I offered an argument for my position, while yours we have to take on faith or some weird pessimistic posture.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 08:39 PM
Response to Reply #74
77. Blinking, schminking
Edited on Thu Jul-22-10 08:46 PM by alcibiades_mystery
The SEC can't permanently waive ratings for ABS. And the ratings agencies wouldn't want them to do that anyway, since that's a significant portion of their business: no ratings requirements, no business. The SEC explicitly call this a "transition period." And it makes perfect sense that the ratings agencies be given time to get their legal departments up to speed on the implications of possible litigation.

This is actually good news, since its basic premise is that the liability exemption is over and done with. In any case, it would take a NEW law to repeal the repeal of the exemption. The regulators are not empowered to do that.
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unlawflcombatnt Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Jul-26-10 07:46 PM
Response to Reply #77
156. Extension?
What's to keep the SEC from extending the "transition period"?

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NBachers Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 10:56 PM
Response to Reply #74
98. Yeah, and I can decide whether I want to buy an unrated bond or not.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 09:37 PM
Response to Reply #66
85. Huh?
I'm not attempting to portray this as a showdown (I was responding to someone else's statements) and I certainly don't think that "no policy coming from this administration or Congress could possibly be good."

I was simply injecting a dose of reality into the discussion.

The repeal is gone for today.

Celebrate if it stands in 6 months, and if whatever stands is even still relevant to the conduct of the parties involved.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 09:47 PM
Response to Reply #85
87. The repeal is NOT gone: 436(g) is still dead and buried for ratings agencies
Edited on Thu Jul-22-10 09:58 PM by alcibiades_mystery
The requirement to provide a rating for a registered issue is suspended for six months. The SEC compromise makes it possible for the ratings agencies to get their legal departments in order. The repeal can't be rescinded by SEC action. The SEC can write rules that enforce a law, and can rescind rules that they themselves write. They cannot write rules that directly contravene the law, as an internal agency rescission of the repeal of 436(g) would do. Furthermore, it is clear that the agency left it to Congress to work this into the legislation so that it would have precisely that power. They asked for comments on rescission last year, and then turned it over to the reform bill when they faced stiff opposition. Barring a repeal of the repeal by Congress, which has touted this particular feature of the legislation, it ain't going anywhere.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 11:58 PM
Response to Reply #87
104. The SEC could certainly undo the intent of the repeal.
I'm sure they would want to wait until after the midterms, but today's reprieve gives them plenty of time.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:04 AM
Response to Reply #104
106. Come on
Mysterioso future catastrophe! Be serious. The repeal is clear: they are liable as experts, and there's tons of established precedent on what that means, since the other people that have to produce documents for registration statements already deal with it (to wit, the accountants). The only way they could kibosh the intent would be to extend the suspension of requirements indefinitely (which they actually can't do), and the ratings agencies don't want that to happen either, since that would mean they cease to draw income from ABS issues completely.
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paulkienitz Donating Member (313 posts) Send PM | Profile | Ignore Thu Jul-22-10 10:08 PM
Response to Reply #63
91. "The question is do the DEMS have the cojones to go the distance?"
When you ask it that way, I'm afraid the question pretty well answers itself.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 10:40 PM
Response to Reply #91
95. They already did
They passed this aspect of the law over the vociferous objections of the ratings agencies. What lobbying would cause them to repeal it? The ratings agencies can't lose the ABS business forever, so the reporting requirement coming back is in their absolute interest. Congress doesn't have to do anything. The law is already passed and signed.
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HughMoran Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 10:09 AM
Response to Reply #4
126. Fucking poppycock
What are you talking about?
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liberal N proud Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:46 PM
Response to Original message
5. CNBC, the ESPN of the financial world
Commentators 24/7 talking finance like it was a sport.

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JuniperLea Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:52 PM
Response to Reply #5
12. They sound like they are selling Sham-Wows!
GAWD I hate them!
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vaberella Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:16 PM
Response to Reply #12
20. !
:rofl:
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T Wolf Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:46 PM
Response to Original message
6. Methinks they doth protest too much. In the same manner that there are supposed to be
laws that protect consumers from defective products, we know that the reality is that proving and winning a liability case is extremely difficult.

The same is going to apply to these "regulations." They will serve to enable the big boys to bully and eventually recover for any loses they suffer from "bad" ratings. But little investors will not have the knowledge or resources to fight through the bureaucracy to hold a fauly rating agency responsible.

And for now, it is simply another club to pretend to hate the pseudo-regulation for.

A corrupt system cannot be reformed, especially when the owners run it for (only) their own benefit. It must be razed and something new put in its place.
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JustAnotherGen Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:47 PM
Response to Original message
7. That was an awesome explanation!
Thank you so much! :pals:
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monmouth Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:49 PM
Response to Original message
8. I wonder if Kudlow will cover this....LOL...n/t
Edited on Thu Jul-22-10 02:53 PM by monmouth
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monmouth Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:50 PM
Response to Original message
10. You should be a teacher, honestly, I absolutely understand everything
in your post. Many thanks for a good lesson and am passing it on...
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Yavin4 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:55 PM
Response to Original message
13. If You Were Standing in Front of Me, I Would Kiss You Full on The Lips
Tremendous. Tremendous post. Thank you very, very, very, very much for that.

The fucking ratings agecenies held the keys to this entire debacle. Without them handing out AAA like candy at Halloween, none of these collapses would have happened.

You know how conservatives love to speculate that it was Barney Frank and the CRA giving out bad loans to unworthy borrowers (read African Americans) which caused the collapse. Just ask them then why would the ratings agencies issue AAA ratings on these ABS. What government regulation made them do that?
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truebrit71 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 05:33 PM
Response to Reply #13
45. Two reasons they did that..1) great big fees from the bond sellers 2) they really didn't understand.
..how the bonds worked or how the risk was leveraged..

They were a) greedy and b) lazy and they just got caught with their nose in the hunny jar..
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Kweli4Real Donating Member (792 posts) Send PM | Profile | Ignore Thu Jul-22-10 07:59 PM
Response to Reply #13
65. Sadly ...
The agencies weren't handing the AAAs like candy on halloween ... that candy is free, each and every AAA was bought and paid for by the bond issuers.
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Kdillard Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 02:56 PM
Response to Original message
14. Thanks so much for that clear explanation.
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zipplewrath Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:05 PM
Response to Original message
16. I think you are overly optimistic
In the short run, no one will rate bonds, even good ones, because they don't know what the legal risks are. That's what has brought this to a full stop. Furthermore, again in the short run, the default position of a rating agency is going to be that ALL bonds are risky, with little differentiation between them.

Potentially, in the long run, without further legislation, all we'll ultimately get is a bunch of "low ratings" with nothing getting "high" ratings. So the rating companies can always claim they informed you they were "risky", but the market will be stuck chosing between "risky, very risky, hugely risky, amazingly risky.....".

As I say, the predominate problem here is that they created effectively a risky "legal" environment, without establishing guidelines for how an agency can actually state risk accurately. Ultimately the courts, and the regulators will establish some guidelines, but I strongly suspect they won't particularly change the underlying problem, which is that the investments basically are hard to assess in terms of risk.

There is a chance that the rating agencies might actually find a way to "expose" and quantify the risks so that you can see the underlying instruments. But that will be hard, especially for new products, as the liars always tend to be one step ahead of the rating agencies.
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creeksneakers2 Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 01:41 PM
Response to Reply #16
151. If that's true
and its my hunch that it is, this trouble isn't going to resolve itself with a cave in from the ratings agencies. How can they cave in if it means losing more money than they make?

The only thing I can think of that won't lead to devastation of the economy or repealing the entire provision would be for Congress or an empowered regulatory agency to define exactly what ratings agencies must check and what specifically negligence is.
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Spazito Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:08 PM
Response to Original message
17. Excellent OP!
Recommended.
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Beetwasher Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:14 PM
Response to Original message
19. Yup
:thumbsup:
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vaberella Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:17 PM
Response to Original message
21. Good stuff. Yet this (meaning financial reform) was bashed to no end. n/t
Edited on Thu Jul-22-10 03:17 PM by vaberella
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JuniperLea Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:55 PM
Response to Reply #21
27. And it's still being bashed here on DU...
Even in this very thread.

I feel like I'm swimming in muck.
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Aramchek Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:18 PM
Response to Original message
22. what, Obama did something good?? Can't be! Isn't he the Antichrist?
:sarcasm:
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meowomon Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 10:47 AM
Response to Reply #22
131. The Antichrist isn't muslim!
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Uzybone Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:34 PM
Response to Original message
23. Insightful post about real world effects, thank you
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great white snark Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:41 PM
Response to Original message
24. Wonderful OP.
Thank you.
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pinto Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:48 PM
Response to Original message
25. Kick
:kick:
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boppers Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:50 PM
Response to Original message
26. Kayandarr! eom
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izquierdista Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:56 PM
Response to Original message
28. A pretty worthless piece
This is where I have trouble with the typical American answer of having one piece of the "free market" regulate another. Now the government could post objective criteria, rate the bonds according to them and publish the result, kind of like the health department does for restaurants. But NOooooooo, the SEC and the government can't intrude into the workings of the free market in such a heavy handed way. Give me a break. It's change, but only chump change.
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Hosnon Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:57 PM
Response to Original message
29. Take your arrogance and shove it.
I have more important things to worry about.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 04:04 PM
Response to Reply #29
32. Huh?
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Hosnon Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 04:10 PM
Response to Reply #32
33. Joke...
Sorry

:toast:
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MedicalAdmin Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 07:32 PM
Response to Reply #29
64. Yes - there are MORE IMPORTANT THINGS.
Free Lohan.
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Hosnon Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 10:10 PM
Response to Reply #64
92. 'Zactly. nt.
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Freddie Stubbs Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 03:58 PM
Response to Original message
30. What is to stop the issuer from going to a smaller rating agency?
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 04:04 PM
Response to Reply #30
31. Nothing
The small agencies and the large agencies will be equally liable. Indeed, the freeze on ratings is producing an opening for smaller ratings agencies to jump into the market - so long as they're willing to stand behind their ratings even at the risk of litigation. Needless to say, no ratings agency should be worried about that. A secondary benefit, if the TBRA's balk is an opening up of the market on ratings outfits, which would break what is an implicit collusion of the big three.
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CakeGrrl Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 04:19 PM
Response to Original message
34. Good post, thank you! k/r
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JNelson6563 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 04:22 PM
Response to Original message
35. Substance? In GD?
Awesome!
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Whisp Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 04:32 PM
Response to Original message
36. thank you very much, a_m
k&r for important information.
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morillon Donating Member (809 posts) Send PM | Profile | Ignore Thu Jul-22-10 04:48 PM
Response to Original message
38. Thanks for the clear, concise explanation! n/t
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mopinko Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 04:53 PM
Response to Original message
39. i believe they are also requiring these bond bundles
to go through an exchange and therefore a clearing house. this is good news for the chicago economy. and for us. the exchanges are monitored very closely.
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Clio the Leo Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 04:56 PM
Response to Original message
40. thank you! nt
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 05:06 PM
Response to Original message
41. I think they've already found ways around it, and regulators will soon cave anyhow.
Edited on Thu Jul-22-10 05:16 PM by girl gone mad
From Barclays:

"The repeal was ostensibly intended to make rating agencies more accountable for the quality of the ratings they give, without causing the securitization process to seize. However, given the position of Moodys, Fitch, and S&P, it appears that issuance of public securitizations is likely to grind to a halt in the near term. Consumer ABS has been the primary generator of new issue activity in the securitization market for the past 18 months, and we do not believe Congress was seeking to reverse those gains. We view the repeal of Section 436(G) as a temporary speedbump that will likely reduce issuance volume significantly for a while. Nevertheless, there are solutions, including a move by issuers to the private/144a market, where public filings with the SEC are not required (remove the filing requirement, and the rating agency liability is also removed). Alternatively, the SEC and the industry could proactively work together to alleviate the obvious unintended consequence of repealing Section 436(G). Although the former may take center stage initially, we believe the latter is a more viable long-term solution."

Not much to get hopes up over.
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ProSense Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 05:36 PM
Response to Reply #41
46. Let them, it's their last resort
and an attempt to sway regulators.

<...>

Meanwhile, solutions include a move by issuers to the private/144A market, where public filings with the SEC are not required, Barclays analysts said.

However, Bank of America Merrill Lynch analysts said in a report this week that limiting ABS issuers to the 144A market could reduce the options available to many investors. With a substantial portion of consumer and commercial ABS issuance stemming from the public market, many investors can not participate in the 144A market and it would therefore not be a long-term solution, analysts noted.

Additionally, a shift to the 144A market could also have the potential of increasing funding costs to issuers which would eventually be passed on to consumers. Some issuers may choose to reduce origination volumes if faced with rising funding costs, BofA analysts observed.

Alternatively, said Barclays analysts, the SEC could also collaborate with the industry to alleviate the unintended results of the repeal. Analysts expect the former to take place initially, but the latter to be the eventual long-term result.

link

Idle threats.



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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:14 PM
Response to Reply #46
49. The regulators have already blinked.
Little rumor that the SEC is giving asset-backed bond issuers a 6-month reprieve on quoting ratings, hoping to stem fears of another market freeze. Fawn Johnson of Dow Jones, on Twitter, via a kind helper.
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ProSense Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:27 PM
Response to Reply #49
51. It's not a rumor, it's
Edited on Thu Jul-22-10 06:27 PM by ProSense
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:33 PM
Response to Reply #51
54. Call it what you like.
Regulators caved.
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ProSense Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:39 PM
Response to Reply #54
55. What happens after the compliance period?
The Securities and Exchange Commission will allow asset-backed bond issuers to omit credit ratings from filings for six months to help them comply with new rules that are part of the most sweeping financial overhaul since the 1930s.


However you choose to characterize it, this is still a temporary reprieve that does nothing to impact the law.

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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:40 PM
Response to Reply #55
58. You are assuming that the change will withstand 6 months of industry pressure.
That's an assumption I'm wholly unprepared to make.
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ProSense Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:43 PM
Response to Reply #58
60. Right, because all their lobbying pressure succeeded in removing it from the bill?
It's not going away.

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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 09:31 PM
Response to Reply #60
84. "It's not going away."
It's already gone away.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 09:48 PM
Response to Reply #84
88. No it hasn't
You don't know what you're talking about.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 11:15 PM
Response to Reply #88
100. For all intents and purposes, the regulators have backed down..
and the ratings agencies are off the hook.

Maybe I don't know what I'm talking about, but I didn't start a thread proclaiming that the most important event of the year had just taken place over a rule change which couldn't even withstand one day of industry pressure and will more that likely be completely dropped after the midterms.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 11:22 PM
Response to Reply #100
102. "For all intents and purposes..."
Nonsense. The regulators instituted a reasonable compromise, and the law stands. Indeed, the statement makes explicit that the law remains in force, and that the ratings agencies better get up to speed on it, because it is the law of the land. You don't know what you're talking about. Everything in the OP remains valid. It is the most important news of the year, at least in the financial sector, and the six month transition period doesn't change that. And since I didn't make anything in the OP contingent on the ratings agency strike, what it "withstands' is neither here nor there. The law can't be "dropped."
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 08:51 AM
Response to Reply #102
120. Well, let's just give the entire industry a six month reprieve on FinReg..
sounds reasonable, right?
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 09:12 AM
Response to Reply #120
121. Actually, there are numerous other new provisions for the ratings agencies
Edited on Fri Jul-23-10 09:14 AM by alcibiades_mystery
This is the most important one, in my view. There's nothing wrong with providing a transition period. If you go into any law assuming as an axiom that it won't work, then of course you will have nothing to say but "It won't work." As it stands, this is a very smart small piece of the total legislation because it applies pressure on the ratings agencies and radiates out to the whole ABS market. Well, it will be overturned and tested, you say. That could be said about any law, and will be said, especially by people who enter into the analysis already knowing what they want their answer to be.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:03 PM
Response to Reply #41
47. I have to go cook dinner for my fam, but I'll explain to you afterwards
why both those options are examples of Barclay's whistling past the graveyard. Especially the notion that the ABS market can be outlet into 144A. It's hilarious and silly.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:19 PM
Response to Reply #47
50. It doesn't really matter.
As most expected, the threat of strike worked. False hopes have been dashed.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 07:13 PM
Response to Reply #50
62. This is actually good news
It's the SEC saying "Get your legal departments in order, because this IS happening."

By the way, the SEC cannot by law permanently waive ratings requirements on ABS. They also cannot reverse the outright repeal of the liability exemption that appears in the bill. Neither of these are rule-making issues. What they can do is what they've done: institute a compliance period to prepare companies (in this case, the ratings agencies) for meeting the requirements of the law.

As for the 144A matter, that's laughable. It's the equivalent of a hot dog seller saying that he will only sell hot dogs to a small group of connoisseurs exempt from general food safety requirements because he doesn't want to comply with FDA rules. It's stupid, which is why Barclay's didn't see it as a long-term solution.

The law depends on the ratings agencies exposure to litigation. I see no problem in delaying its implementation for some period to allow those agencies to get straight with the legal implications. It will only produce better ratings at the end of the day if they work out their system, fulfilling the purpose of the law and producing precisely the results I listed in the OP. I didn't frame this as some "showdown," because I'm not that interested in little daily dramas (as you seem to be). This is about policy, and this is damn good policy.
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 09:47 PM
Response to Reply #62
86. I think you've got some coke-bottle thick rose colored glasses on today.
Why 6 months? What could possibly happen within the next 6 months that would ensure the ratings agencies are not exposed to any new liability... hmmm..
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 09:50 PM
Response to Reply #86
89. Six months is reasonable time for
the legal departments to get up-to-speed on liability implications and how they should change processes internally. The SEC explicitly states that it is a transition period for this purpose. That's an EXPLICIT statement. You have vague imaginings, general pessimism, and very little knowledge of the issues. I'll stick with explicit statements, thanks.
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HughMoran Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 10:15 AM
Response to Reply #89
128. "vague imaginings, general pessimism, and very little knowledge of the issues"
Well said.

All of your arguments are well constructed and I appreciate your patience in carefully explaining this topic to the cynics.
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Beetwasher Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 11:32 AM
Response to Reply #128
138. Who Need s Facts When You Can Trust Your GUT About What's REALLY Gonna Happen!!!
Facts shmacts. It's all in the gut.
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librechik Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 01:34 PM
Response to Reply #41
150. Really? It's certain Obama would veto such a repeal--How can they claim
that's a better option? More Blind Ostrich channeling from the financial gods.
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SalviaBlue Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 05:10 PM
Response to Original message
42. Thanks for posting this. You made something that normally glazes my eyes over understandable.
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Starbucks Anarchist Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 05:26 PM
Response to Original message
44. How dare you post about meaningful success on this website, heathen.
:toast:
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girl gone mad Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:39 PM
Response to Original message
56. SEC Grants Delay on Ratings for Asset-Backed Debt
SEC Grants Delay on Ratings for Asset-Backed Debt

July 22 (Bloomberg) -- The Securities and Exchange Commission will allow asset-backed bond issuers to omit credit ratings from filings for six months to help them comply with new rules that are part of the most sweeping financial overhaul since the 1930s.

Borrowers arent able to obtain permission from ratings firms to include their rankings in their registration statements, Meredith Cross, the director of the SECs division of corporate finance, said today in an e-mailed statement announcing the change.

This action will provide issuers, rating agencies and other market participants with a transition period in order to implement changes to comply with regulations that were signed into law this week by President Barack Obama, Cross said.

The financial legislation makes credit-rating companies vulnerable to lawsuits when underwriters include their assessments in documents used to sell debt. The law subjects ratings firms, such as Moodys Investors Service, Standard & Poors and Fitch Ratings, to so-called expert liability, meaning they would face the same legal risks as accountants and other parties that participate in bond sales.


Let's see where we are in six months. That's a long time to lobby for changes, find effective loopholes or make the threatened move to private markets.
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rucky Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:42 PM
Response to Original message
59. At least investors won't have a false sense of security anymore. n/t
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impik Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 06:54 PM
Response to Original message
61. Shame on you for posting this here
It's going against any possible memo. You should delete this post!!!!

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RainDog Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 08:11 PM
Response to Original message
67. kick to mark to read all later. thx. n/t
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valerief Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 08:20 PM
Response to Original message
68. Thanks for the post! nt
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Shireling Donating Member (222 posts) Send PM | Profile | Ignore Thu Jul-22-10 08:28 PM
Response to Original message
70. I hope that this works
I hope that it can prevent another credit-default swap fiasco.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 08:35 PM
Response to Reply #70
73. Together with the other mechanisms, of course
This is a particularly interesting aspect of the bill because it uses a sensible change (make ratings agencies as liable as accountants for the expert statements people rely on) to create a cascade of incentives all the way through the ABS pipeline. It's smart.
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RainDog Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 11:21 PM
Response to Reply #73
101. iirc, the ratings agencies were really where accountability faltered
no agency was willing to go against the big guns and make honest assessments - or, even cared to do so, from what I remember reading about this.

so, if this regulation is made to stand - this will stop some of this ponzi scheme crap that has been going on, it seems.

your explanation was very well done. thank you for the OP and the other posts.

hopefully this is a small step back from financial insanity.
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DeSwiss Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 08:34 PM
Response to Original message
72. K&R
Wonderful elucidation.
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Little Star Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 09:11 PM
Response to Original message
80. K&R
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ejbr Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 09:27 PM
Response to Original message
81. SOME good news n/t
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liberation Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 09:29 PM
Response to Original message
83. Good news if there is a positive outcome of this bill...

Also, I thought rating agencies were already liable for rating junk bonds. No?
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paulkienitz Donating Member (313 posts) Send PM | Profile | Ignore Thu Jul-22-10 10:06 PM
Response to Original message
90. glad to hear some good news for a change
tho I do worry that the short term effect will be deeper recession due to no capital lending.
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eridani Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 10:52 PM
Response to Original message
96. This is very helpful indeed. Still--
--when are we going to separate investment banking from regular banking, and keep banks from getting too big?
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uponit7771 Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 10:55 PM
Response to Original message
97. Could this be the reason US bonds are being bought by the truckload now? TIA
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laylah Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Jul-22-10 10:56 PM
Response to Original message
99. Thank you so much
for laying this out in "layman's terms". May I please share your post with my e-mail list? I will certainly give you credit.
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JDPriestly Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:09 AM
Response to Original message
107. Yes. This is the kind of change I voted for too.
This is important.

And thanks for your clear, simple, understandable explanation, alcibiades_mystery

Great post.
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Radical Activist Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:21 AM
Response to Original message
108. I'm sure we can count on left pundits to tout this accomplishment for Obama!
Right? Right?

Oh that's right. We just form circular firing squads and have contests over who can be the most cynical.
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Major Hogwash Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:23 AM
Response to Original message
109. "What's your credit score?" --- it's a total scam that reaches clear down to the consumers.
That's why the consumer protection policies included in the new financial reform law are so important.

"What's this worth?" has taken on a whole new meaning, because now it will have to mean something in real, concrete monetary terms.

"What's in your wallet?" will now become more valid and real than they ever intended that empty marketing phrase to mean before!!
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jtuck004 Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:29 AM
Response to Original message
110. Anyone want to start a bond rating agency? We gotta find a couple

of auditors, some sales folks, get a web site up, and find someplace to publish those cheesy little pamphlets. And we have to get some insurance. Anybody know anybody at AIG? They know what it feels like to get, uh, taken.

Won't be frozen for very damn long...
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EmeraldCityGrl Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 04:36 AM
Response to Reply #110
113. LOL..count me in.
My one great opportunity to get in on the giant ponzi scheme AKA The Global Bond Market.
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jtuck004 Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 11:40 AM
Response to Reply #113
139. My wife told me that we don't have enough experience.

I pointed out that we could hardly do a worse job than has been done for the past few years... ;)
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Scurrilous Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 01:01 AM
Response to Original message
111. K & R
:thumbsup:
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waronbanks Donating Member (115 posts) Send PM | Profile | Ignore Fri Jul-23-10 04:31 AM
Response to Original message
112. Nice post and I would take it as good news
if I didnt have the nagging feeling that those who are paid to oversee the TBRA will swiftly be brought under control and the party will continue.

But yes this is a very good part of the legislation.
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Hekate Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 06:03 AM
Response to Original message
114. KnR
:fistbump:
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geckosfeet Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 07:54 AM
Response to Original message
115. Yes. This is good news. The law should also separate ratings houses
Edited on Fri Jul-23-10 07:54 AM by geckosfeet
from any other part of the trading industry so that they can be truly independent to rate financial obligations accurately. One of the reasons their ratings became so skewed was pressure from investment companies to favorably rate securities (mortgage backed securities) that the mortgage companies package an resell as good investments.

The new law simply says 'you can't lie to sell your stuff'. This is something we learn in second grade. Now we need laws for it.
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DCBob Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 08:11 AM
Response to Original message
116. Excellent!.. I did not know this was in FinReg..
The ratings agencies played a big role in the financial collapse. This should help.

Nice review of the issue.
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erfmasn Donating Member (1 posts) Send PM | Profile | Ignore Fri Jul-23-10 08:22 AM
Response to Original message
117. Good explanation. Unfortunately, this is still capitalism.
You can try to regulate it all you want, but the end result will always be economic turmoil which leads to the rich getting richer and the poor getting poorer. The internal contradictions of capitalism are unavoidable.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 09:16 AM
Response to Reply #117
123. I don't disagree with you
However, assuming that the Congress won't be able to pass laws overturning capitalism, I'm happy for them to provide local provisions that make it less destructive for you and me in the present.
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meowomon Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 09:19 AM
Response to Original message
124. After the phrase "asset backed bonds" all I read was "blah blah blah".
Sorry, I am really financially challenged. Thinking of interest rates and bonds and other wall streety stuff makes my head spin.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 09:31 AM
Response to Reply #124
125. You can lead a horse to water, I guess
:shrug:
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thereismore Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 10:39 AM
Response to Reply #124
130. I am sure you have other abilities, don't worry. But the financial news is good. nt
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meowomon Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 10:49 AM
Response to Reply #130
132. Thank you for the translation
I don't do finances well. Economics is a dirty word to me.
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Wednesdays Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 10:14 AM
Response to Original message
127. K&R
:kick:
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wryter2000 Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 10:55 AM
Response to Original message
134. K&R
Thanks for the explanation. I still think the Sherrod story is important, but I can contemplate two different issues at once.

:hi:
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russspeakeasy Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 11:12 AM
Response to Reply #134
135. Sure, all about you. What about the rest of us?
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sulphurdunn Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 11:18 AM
Response to Original message
136. The Law never inhibited Arthur Andersen
from cooking the books for Enron. The question with very greedy people is always the same: Is their fear of justice greater than their love of money?
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 11:24 AM
Response to Reply #136
137. You can say that about any law
People will murder, even if murder is against the law. That's no reason not to have a law against murder, nor is it an element that helps us judge such laws. That some people will violate the law is no reason not to make them, or to judge any particular law as bad or ineffective. So,would you rather have no legal liability for ratings agencies in the law, or legal liability for ratings agencies as law? That's the question. General statements about human nature relative to law are all well and good in the abstract, but don't particularly help us decide on or judge actual laws.
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sulphurdunn Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 11:50 AM
Response to Reply #137
140. Good laws that don't put bad
people in jail are worse than no laws. At least no law doesn't give its imprimatur to bad behavior, is immune from hypocrisy and cannot corrupt itself. When heads start rolling down hill from the top of Wall Street I'll entertain your argument about the law.
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leeroysphitz Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:11 PM
Response to Original message
142. Thank you for pointing this out. I admit I would have gone unaware of this significant victory.
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1776Forever Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:25 PM
Response to Original message
144. Thank you for taking the time to inform us "little" people what it REALLY means! Hurray!! n/t
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:38 PM
Response to Reply #144
145. Huh?
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1776Forever Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:39 PM
Response to Reply #145
146. Thanks! Just wanted to say thank you for the time. I have no idea what this was all about until I
read your post!

:hi:
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aquart Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 12:41 PM
Response to Original message
147. You could have told us that without the sneer.
Edited on Fri Jul-23-10 12:41 PM by aquart
You could have said all that without demeaning other people for being concerned about justice to one human being whose character was publicly and dishonestly assassinated.

It's nice that you are so superior a being that you see what is truly important at a glance. We need people such as you to boil down all that complicated stuff.

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on point Donating Member (613 posts) Send PM | Profile | Ignore Fri Jul-23-10 12:48 PM
Response to Original message
148. Can you say "Due Diligence", or else?
And yes, this is the kind of change I expected, so while I am still critical of the dems lack of backbone, this particular instance is not one of them
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Overseas Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 01:20 PM
Response to Original message
149. I saw that and was intrigued.
Amazing to see them so discombobulated by the requirement for accuracy.
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Moostache Donating Member (905 posts) Send PM | Profile | Ignore Fri Jul-23-10 01:43 PM
Response to Original message
152. Anyone still believe Breitbart's hit job was coincidence?
This type of information, the EXACT THING the media is supposed to cover and illuminate for the American People, is given short thrift and sent to the back room while we obsess over minute details of a story from 24 years ago being related at an NAACP speech!

We deserve better, but we seem incapable of demanding it.
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Divine Discontent Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 01:45 PM
Response to Original message
153. that's great news indeed. I never understood though why some people feel the need to gain focus on
their post by belittling DUers for paying attention to something else. Your post stands greatly on its own merit and could have simply said, 'The most important news of the year that is good!' I find the massive disaster of the Gulf the main focus around here for months, and that is a mighty important news story.
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alcibiades_mystery Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Jul-23-10 04:30 PM
Response to Reply #153
154. I don't see how I belittled anyone
Besides, maybe 53,000 page views makes up for a little hurt feewings...

:-)
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