HARTFORD - Connecticut Attorney General Richard Blumenthal is questioning why $400 million is going to the big three credit agencies that he says helped created the economic meltdown.
Blumenthal said Monday he is investigating why a $1 trillion government bailout program steers money to Moody's, Fitch and Standard & Poor's.
Blumenthal has written to Federal Reserve Chairman Ben Bernanke asking him to revise the program. He ways the program gives the three rating agencies an advantage and assures that their seven smaller competitors can't compete for the work.
Blumenthal also makes the point that these agencies are violating the spirit of antitrust laws -- with Bernake's help!
Blumenthal's letter to Bernanke says, "Further, limiting the number of acceptable credit ratings agencies under the TALF program solely to the three major credit rating agencies contradicts and undermines Congress' intent to enhance competition; solidifying the major credit rating agencies' market dominance to the detriment of the other qualified NRSROs (Nationally Recognized Statistical Rating Organizations). Even more inexplicably, it rewards the very incompetence by Standard & Poor's, Moody's Investors Service, and Fitch Ratings, that helped cause our current financial crisis. In effect, the policy handsomely rewards failure. Indeed, it enables those specific credit rating agencies to profit from their own self-enriching malfeasance. [...]
Blumenthal's letter continued, "I strongly urge the Federal Reserve to reassess and revamp its current policy and to adopt a policy that gives all properly registered NRSROs the same chance to compete for work rating securities for the Federal Reserve liquidity enhancement facilities, such as the TALF. The Federal Reserve should not be favoring large market participants, whose mistakes helped precipitate the current crisis, over smaller ones seeking to break into the market."
Good luck with that, Dick. But don't hold your breath. This is yet another reason why Congress needs to be writing laws to regulate the financial industry. The Fed won't do it.
When someone robs a bank, they go to prison. What's the penalty for when bankers' rob a nation?
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