Connecticut Attorney General Richard Blumenthal said in a letter today to Fed Chairman Ben Bernanke that the U.S. Federal Reserve’s $1 trillion effort called the Term Asset-Backed Securities Loan Facility that aims at restarting the market for securities backed by loans, “unfairly” benefits the three largest credit rating companies.
The Fed mandated that for securities to be eligible for government support they must be rated by two or more “major nationally recognized statistical ratings organizations,” or NRSROs, Blumenthal wrote. Only Moody’s Investors Service, Standard & Poor’s and Fitch Ratings would qualify, excluding six other smaller companies, the attorney general said. [via Bloomberg]
Blumenthal is directly questioning why up to $400 million in fees in federal bailout money is going to the big three credit rating agencies that he says helped create the economic meltdown in the first place by rating mortgage-backed securities AAA only to later downgrade the debt.