Looks like another prime example of pass the bill to find out what's in it:
Standard & Poor's, Moody's Investors Service and Fitch Ratings are all refusing to allow their ratings to be used in documentation for new bond sales, each said in statements in recent days. Each says it fears being exposed to new legal liability created by the landmark Dodd-Frank financial reform law.
The new law will make ratings firms liable for the quality of their ratings decisions, effective immediately. The companies say that, until they get a better understanding of their legal exposure, they are refusing to let bond issuers use their ratings.
That is important because some bonds, notably those that are made up of consumer loans, are required by law to include ratings in their official documentation. That means new bond sales in the $1.4 trillion market for mortgages, autos, student loans and credit cards could effectively shut down.
Stephen Spruiell at NRO provides a reminder that Sen. Chris Dodd, D-Conn., actually said of financial reform "No one will know until this is actually in place how it works." The idea that a "financial reform" bill might shut down the bond market is a real testament to what a slapdash piece of legislation this is.