Wednesday, July 30, 2008

Here's Barney

And everybody’s favorite, Barney Frank, comes to Bill Lockyer’s rescue with The Municipal Bond Fairness Act. Because its all about fairness. If the credit rating agencies are giving government bonds risky ratings, the force of law to increase government bond ratings is justified, you see.

The credit rating agencies are, you see, discriminating against government agencies. Bill and Barney are buddies.

As far as I can tell:

1. Governments operate under less stringent accounting standards than private enterprises.
2. The credit rating agencies take this into account and issue lower ratings for a set of government numbers than they do for a set of private numbers (this practice must be ended by H.R. 6308).
3. Governments want to take past rates of default into account, instead of future projected rates of default into account.

H.R. 6308 was introduced to committee last month.

Update: My link to the legislation doesn't work. Google H.R.6308.

2 comments:

George said...

What this means is that my advice (flee to quality - G.O.L.D.) is just as good as these overpaid boneheads (and that's a NICE epithet for Mr. Frank).

I don't have the degree, but I have a better sense of history than to negate the hard work of the bond rating folks and force them to give over-rosy ratings to worthless paper.

There isn't a government-related rating of any sort that I will trust any more.

Bill said...

Kinda funny it is how California government workers are now on minimum wage, or being sent home, isn’t it George?

Nothing to do with, say, the budget?