OK, Agencies, Your Turn…

Here is the “skin–in-the-game” clause for originators and ratings agencies. This helps to prevent the next crisis.

 We still need clarification and common sense review of the real value of existing multi-bligor securities. The existing bonds that have been downgraded will probably never be upgraded. These assets will be a drag on bank capital for years (until they mature). We need to address the existing  problem. We can’t let static rules set bank capital levels. Accounting should reflect economic activity, not drive it.

Let’s ask the NAIC how to fix this problem. They have it figured out (see below).

FDIC May Tie Underwriter, Rater Pay to Asset-Backed Performance – Bloomberg.com, November 19, 2009