Congressional Debate Over Rating Agency Bill

Congress can’t help themselves.

They discovered that municipal bonds are rated differently than corporate bonds.

It’s true. The ratings scales are not equal. Muni ratings are much tougher than corporate bond ratings.

Politicians yell that the ratings agencies are unfair to municipalities, raising their cost of borrowing due to the unduly harsh ratings.

First of all, Congress can’t tell the NRSROs how to rate (what with all that pesky First Amendment language).

Secondly, should we be upgrading all muni bonds, right in the beginning of a recession?

The state of California has been the most vocal about this issue. Maybe they should work on improving their financial condition, instead of rigging the ratings.

House Democrats, Republicans Differ Starkly on Rating Agency Bill – The Bond Buyer, October 28, 2009