Raters gonna rate … but should they?
The one industry that emerged relatively unscathed from the regulatory reforms enacted after the financial crisis was ratings agencies. Considering the role questionable ratings played in fueling the credit crisis and the obvious conflict-of-interest inherent in the business model of ratings agencies, it is shocking regulators did not do more to reshape the industry.
This analysis from Gretchen Morgenson of the New York Times shines a light on the industry and looks at how the Financial Choice Act that advanced out of the House financial Services Committee also managed to whiff on the topic of ratings agencies. Morgenson asserts that not only does the Choice Act repeal the minimal reforms put in place after the crisis, the new bill would further entrench the current industry leaders, rather than promote fair and transparent competition.
The piece goes on to highlight proposals to eliminate the government’s ratings agency certification entirely. I am all in for that. If you are a major firm and you prove to be terrible at assessing the creditworthiness of a particular financial instrument, then that is your problem. Conversely, if a firm proves particularly good at assessing creditworthiness, then that firm shall reap just rewards from the market.
Speaking of industries with limited competitors…
We all know that has been bad for the reputation of the US airline industry as of late, but how is it working out for the accounting industry?
About the Freedom of Information Act request … shhh!
House Financial Services Committee chairman Jeb Hensarling, should face scrutiny after it has been revealed that he wrote to the Treasury Secretary Steven Mnuchin to deny a Freedom of Information Act request pertaining to communication between his committee and Treasury staffers.
I say he ‘should’ face scrutiny, because he probably won’t.
Fiduciary rule tango continues
Paul Schott Stevens, the president and chief executive of the Investment Company Institute, used the group’s general membership meeting in Washington to step onto the Fiduciary Rule Dance Floor. Stevens lamented the length of the delay of the fiduciary rule, which has been delayed once and is set to take effect June 9, and told the gathering that the prospects for an additional delay are “uncertain.”
This is ludicrous. And it is also just theater. There is no way the rule is going into effect on June 9 and Stevens knows it. Seriously, does anyone really think that a rule that is hated by the Trump administration and loathed by Republicans on Captiol Hill has any chance of being implemented now that Alexander Acosta is in place atop the Labor Department?
Omaha … somewhere in middle America
Berkshire Hathaway’s annual meeting kicks off tomorrow in Omaha. People love Warren Buffett because he makes oodles of money and ‘gets right to the heart of the matter’ when it comes to investment strategies. What wisdom will the Oracle bestow upon his followers this year?