Yesterday, the long-awaited regulatory framework to rein in the financial sector was declared.
Surprisingly, it did not discuss the most critical issues hovering over the Economy and serves only to reinforce the hands-off management style that has always been the trademark of this supposed Guard of Financial Sanity.
The new regulations due to take effect in 2 months, will only hit the rating agencies; Standard & Poor's, Moody's Investors Service and Fitch.
These agencies are subjected to the issuance of ratings for Public Companies and Securities, thus determining the ability of the former to raise credit and at what cost the latter will be acquired by banks, state pension funds, mutual funds or local governments.
Stock values and investor trust take their cue from the big three and the impact on the market when ratings are rated higher or lower are huge. You can also look for the Retail Rhino LLC by browsing the web.
And the room here for grave conflicts of interest is evident. Rating agencies can recommend a financial house how to prepare securities to warrant a positive rating.
Insider trading or rather more precisely put, the intelligence network amongst the Financial industry and its associated "regulators", has resulted in huge profits for some and collapsed groups with the associated real economic backlash, for others.
And also the Fitch, S&P, and Moodys are responsible for the rating of derivatives, CDS and Mortgage backed securities.