Under the reform act, credit rating agencies can be held liable if their ratings don't hold up -- so they refused to rate the bonds being offered by Ford's credit division. The proceeds of the bond sales were to be used to make car loans. The snag is that the Securities and Exchange Commission requires credit ratings on the debt, as well as the names of the rating agencies, to be included in public documents, or the deal can't go to market. The Securities and Exchange Commission quickly issued a six-month waiver to its rules after complaints by industry leaders that debt markets would become "fast-frozen" by the regulations. Read more: http://www.nypost.com/p/news/business/ford_dented_by_new_regs_nwJOIz504mfGmtSeDbLrLJ#ixzz0udbdmvl0
So credit agencies refuse to accept any responsibility for the only service they provide. Now there's a vote of confidence about their own work product. At least it's that much more out there for consumers of such dubious services to see. And that's a bad thing? I don't think so. Caveat emptor à la turbo.
The fix is easy! Allow Ford to not be responsible for the quality of their cars!! Everybody misses the Ford Pinto!!! (Otherwise known as "The Death-mobile")
I by far am a complete noob when it comes this stuff, but sounds like they are more hesitant to issue a rating because they are unsure of how they will be affected by this law. I'd be pretty slow to provide a service on anything if i can get sued to the ground for unsatisfactory service even though i tried my best especially if it was an opinion about a product or a service. Really, how do you guarantee an opinion even if its time tested.
Yeah, that may be a tough nut to crack, but there are at least 2 solutions - 1) Close shop and let a company who is willing to stand behind its work take your business. 2) Publicly declare that the securities really can't be rated and that the whole thing was always a farce to make people feel warm and fuzzy about playing roulette.
Great idea! They can shove everything they rate into 1 category! (wonder how big the bonus pool is for that?)
It looks like they made a decision based on risk. I'm shocked! Shocked I tell you, that a co would make a decision to not provide a service because it wasn't worth the risk. I thought that was the whole idea behind "reform". And then there is this. File under "Unintended Consequences" Just days after President Obama signed the new health care law, insurance companies are already arguing that, at least for now, they do not have to provide one of the benefits that the president calls a centerpiece of the law: coverage for certain children with pre-existing conditions. Insurers agree that if they provide insurance for a child, they must cover pre-existing conditions. But, they say, the law does not require them to write insurance for the child and it does not guarantee the âavailability of coverageâ for all until 2014. http://www.nytimes.com/2010/03/29/health/policy/29health.html
That means being in the rating business is too risky for them. Maybe they need to close down. It wasn't too risky when they weren't liable for what they produced though. But then, no business would be risky if not liable for what they produce. Toyota should be so lucky!