"Please Don't Use Our Credit Ratings..."

In reaction to the passage of the new financial reform bill, the credit ratings agencies of Moody’s, Fitch Group, and Standard & Poor’s are evaluating their liability. According to the Wall Street Journal, some bond markets have shutdown in response to this statement.

Why is this important?

…some bonds, notably those that are made up of consumer loans, are required by law to include ratings in their official documentation. That means new bond sales in the $1.4 trillion market for mortgages, autos, student loans and credit cards could effectively shut down.

I thought that the law was, according to Obama,

…the strongest consumer protections in history…a set of reforms to empower consumers and investors…

and according to Senator Reid

“It’s about fairness and justice.

I’m hardly a financial expert, but how are consumers ’empowered’ if the bill potentially shuts down the bond markets responsible for making consumer loans? This brand of ‘fairness and justice’ (like that dispensed at Countrywide) brings to mind a old anecdote about the brothel piano player and the politician, but I think ultimately Reagan caught the gise of this bill:

The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.