Let’s Score Some Cheap Rhetorical Points!

by Alex Stenback on March 4, 2009

Regular readers know that I am always on the hunt for an irony angle in any story.  It does not get much thicker than the following.

First, recall this passage from the WSJ on Standard and Poors questionable rating practices:

…an S&P analytical staffer emailed another that a mortgage or structured-finance deal was “ridiculous” and that “we should not be rating it.” The other S&P staffer replied that “we rate every deal,” adding that “it could be structured by cows and we would rate it.”

Now consider the fine print on the latest of the ASFSR’s (Acronyms to Save the Financial System from Ruin) announced by the Federal reserve, the TALF (which stands for “Term Asset Lending Facility,” and is intended to help re-start troubled consumer lending channels):

What types of [ABS = Asset Backed Securities] are eligible collateral under the TALF?
Eligible collateral (eligible ABS) will include…ABS that have a credit rating in the highest long-term or short-term investment-grade rating category from two or more major nationally recognized statistical rating organizations (NRSROs) and do not have a credit rating below the highest investment-grade rating category from a major NRSRO.

Right.  So the “rate everything no matter how bad it stinks to high heaven” rating agencies that played a central role in delivering this mess to the doorstep of every American taxpayer are now enlisted to become the primary stewards of taxpayer dollars under TALF. Peaches that.

Not that there is any other choice – in an environment where the Treasury Secretary barely rates a staff it’s inconceivable that a competent alternate party could be found – so let’s just hope the ratings agencies have been sufficiently chastened by their recent failings to buck up for the taxpayers here.

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