Bernanke's Ratings Blind Spot

Isn’t anyone paying attention? Part of the cause of the financial meltdown was the allocation of inappropriate credit ratings to banks that had leveraged themselves into deepest risk. But according to Bloomberg, "Federal Reserve Chairman Ben S. Bernanke is basing hundreds of billions in emergency lending on credit ratings from companies that gave AAA grades to toxic securities." Most of the Fed's $1 trillion in transactions have required appraisals by Moody's, S&P, or Fitch. "They're outsourcing the credit assessment to a group of people whose recent performance has been unbelievably bad," said one asset evaluator. "If their goal is to not take a loss on these assets, they should be hiring independent analysts." Rather than relying on the three big ratings agencies, says another source, we should be ending the trio's "official status as the government's favored arbiters of credit quality." It's impossible exactly to figure out how the Fed analyzes debt. In order to discover exactly where taxpayers’ bailout money is going, Bloomberg has filed a federal lawsuit seeking full disclosure.