Bill O'Reilly won't like this, but Al Franken is proving his moxie as a US Senator yet again.
This is an important measure to be passed:
This is a big victory for financial reform:
The Senate on Thursday voted to impose tighter regulations on credit-rating agencies, which have been criticized for misjudging the risks of debt instruments at the core of the 2008-2009 financial crisis.
The ratings services were tied to the banks that were using them so here's a tool stripped away that helps perpetrate corruption on Wall Street.
Chris Bowers at Open Left had a good summary of the amendment this morning:
Making the bill stronger: Sen. Franken (D-Minn.) creates a Credit Rating Assignment Board which would assign the credit rating agency that does each initial rating in order to reduce the inherent conflict of interest in the current business model - where the person who hopes to sell the rated product pays the rater. This amendment stops securities issuers from shopping around among credit rating agencies for the best rating, leading raters to inflate their grades as they scrap for market share.
Why it matters: Credit Rating Agencies got paid to slap AAA ratings on packages of dangerous investments they did not even try to understand or evaluate. Their triple A ratings created huge markets for these investments, and spread them through every corner of the market. When the House of Cards built on their false promises collapsed, millions of Americans lost their savings.
The financial reform bill gets stronger and stronger by small increments. This is a good result. Let's hope there is more like it to come.
And the ratings agencies should be held accountable. That is unless this gets kicked to the Supreme Court, who will vote for big business every time with Roberts leading the way.
This week, CalPERS, the largest U.S. public pension fund, won a court ruling allowing it to proceed with a lawsuit accusing the three biggest rating agencies of assigning "wildly inaccurate and unreasonably high" ratings, causing $1 billion of losses. The agencies say they expect to eventually prevail on the misrepresentation claim.
The clearinghouse measure could give smaller ratings agencies a chance to challenge the dominance of the top three firms.