Will New Ratings Reforms Be Effective?

The attached article talks about how the House recently made extensive progress towards eliminating all language from both laws and financial regulation rules that references rating agencies (NRSROs).  The “system” will no longer depend on such agencies.  These are the first steps of progress towards reform and are commendable.  However, the real wood that needs to be chopped is determining what the new system will look like when it no longer relies on the agencies.  This new system must consider many factors, but to ultimately be effective it must lead us to an economic value attached to the assets that are rated versus the simple “good” vs. “toxic” diagnosis that we currently have.

Here is the article:

One Cheer For Barney Frank – WSJ.com, December 23, 2009