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CREDIT CRUNCH COMES FULL CIRCLE WITH THE PLAN TO BAIL OUT BANKS

In the hunt for culprits of the credit crunch the lack of information, perhaps imperfect information, and the rating agencies have been unfairly singled out as prime suspects.   What received scant attention is the fact that in the value chain of capital markets there are many players, some of which acted irresponsibly, misrepresented information, many of them got paid up front, and a poor regulatory regime did not require due diligence on underlying assets.  The FED (or tax payer) is now picking up the pieces.  BIIA covered the SEC report on the role of rating agencies in the July/August 2008 newsletter.  With the plan to relieve banks of illiquid ‘toxic’ debt instruments, the entire matter has now come full circle to point of origin: The US Federal Reserve Bank, which under its former Chairman Greenspan, kept global finance awash with money for too long.  Whether the plan will eventually get congressional approval or will work at all has yet to be determined.  To read the full story go to:  http://www.biia.com/library.php#208

BIIA Newsletter September 2008 Issue

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