Ratings Agencies to Cash in on the TALF

Sweet deal for the Rating Agencies… StockJockey calls for some pro bono work to show their appreciation. Or perhaps Congress will write a new tax law.

Ratings Agencies to Cash in on the TALF

Courtesy of StockJockey at 1440 Wall Street

The ratings agencies no doubt love the attention that has been focused on AIG over the past week, but they could soon have there place in the hotseat when Main Street catches wind of this – a coming windfall from rating the governments TALF program….which might not exist if the ratings agencies had done their job in the first place:

Credit-rating companies, widely assailed for their role in fueling the financial crisis with overly rosy debt ratings, stand to make a billion-dollar windfall in the government’s latest attempt to heal the credit markets….Under the so-called Term Asset-Backed Securities Loan Facility, or TALF, the Federal Reserve will lend money to investors who buy securities backed by such things as auto, student, small-business and credit-card loans. But the government, hoping to protect itself from losses, will allow its money only to be used to buy securities rated triple-A by the ratings services.

Rating services typically charge $40,000 to $120,000 for every $100 million in so-called structured-finance securities they rate. For the initial $200 billion portion of TALF, that translates to $80 million to $240 million. If the program is extended to $1 trillion as the government plans, those fees could skyrocket to anywhere between $400 million and $1.2 billion. WSJ

While blaming them for the entire mess we are in is a bit over the top, they could defuse this situation by doing a little pro bono work for the taxpayers.

Of course, with Warren Buffett holding a big chuck of Moody’s (MCO-NYSE) perhaps only the Oracle himself can push this through. What do you say, Warren?

Your silence on the ratings debacle has been deafening – perhaps you can take a break from your ongoing PR campaign (which will soon hit a fever pitch as Berkshire’s annual meeting looms) and do the right thing here…it would be a nice payback for your investment in Goldman Sachs, which might well be written off already if it were not for Hank Paulson’s largesse.
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