Three not necessarily inconsistent takes on causes and effects:
A neat way to embarrass the government. The rating agency logjam and the GM deal announced yesterday are closely related: if there’s one thing GM will think it still needs for its IPO, now that it’s got a subprime lender, it’s a freely moving subprime auto loan pipeline. So I would guess that there might be a GM IPO sometime in the next six months, but possibly not right at the end of that time.
Or, this instant fracas just points to the likely result of the tortuous bill-drafting process – “unintended consequences”, a phrase we will see plenty more times in connection with regulatory change. Maybe that turns into organized push back by the business.
Or, perhaps it was an intended consequence, and the agencies’ letters to issuers, requesting that the rating not be registered, actually represent first drafts of the ratings agencies’ suicide notes. If even they don’t trust their own ratings, why should anyone else? What is the formal point of the agencies now, apart from their niche in the regulations? Who is left to offer guarantees against rating agency risk, if not the agencies? Actually, one can see why they’re a bit windy. Pretty much everyone else who took that risk on has gone bust, or lost their job. But maybe it’s a business opportunity for someone if the price can be got right.
Oh, I see Disequilibria sort of agrees with me, plus a linked video.