Loose Ends... Vol. XIV

Henry Waxman (D-CA) was a busy man this week holding hearings with the credit ratings agencies and federal regulators. The documents pertaining to the ratings agencies hearings can be found here. The more I learn about what these companies do (actually, what they don't do!), the more I realize reform is needed. The big three (Moody's, S&P, and Fitch) dominate the U.S. market with over $6BB in revenue in 2007. Moody's margin is over 50%. This industry needs an overhaul with increased competition and accountability. If you are going to pick one file to read from the hearing, read the memo to Moody's board of directors.

Then Alan Greenspan, Christopher Cox, and John Snow were grilled by the committee. I didn't watch as much of this as I had wanted, but did get the vibe that Greenspan denied having any fault in the crises. He place the blame on the high demand for subprime mortgages which, due to low default rates as home prices grew, were easily packaged and sold to eager investors with the credit rating agencies happily following in tow with favorable ratings. Hmm... was there any other catalyst for the amount of money which was being thrown around? Could monetary expansion due to low interest rates and the resultant easy credit have anything to do with this spike in demand? I sure think so. I guess Alan doesn't. Or, if he does, he perjured himself.

This chart shows how the massive increase in home prices followed the sharp decrease in the Federal funds rate. Easy money from the Fed led to the expansion of credit, thus increasing demand for homes.

***

Also this week, Ralph Nader and Chuck Baldwin received airtime on C-SPAN as they were able to reschedule the presidential debate of the third-party candidates. Bob Barr and Cynthia McKinney were invited, but did not show up due to scheduling conflicts. I thought Baldwin did a fine job. Bob Barr's campaign has been as bad as John McCain's (or worse if that's possible), and this was a good opportunity for Baldwin to gain some support. I'm holding firm to Barr. But, that's due in large part now to Baldwin's absence on Indiana's ballot.

***

Finally, I laughed out load this morning at an exchange between Tom Brokaw and John McCain this morning on Meet the Press. It's pretty sad, actually: McCain is looking older by the day, he is losing ground on Obama by the day, and Tom Brokaw didn't even push the issue that McCain didn't even answer the question.