A high-finance interlude

Having given birth last week, I feel the need to write about something that has nothing to do with babies or even children. Enough about poopy diapers, sore nipples, and sleep for a minute; let’s take a relaxing break with a little high finance. And here’s my chance to give another shout out to Andrew Leonard of Salon’s How the World Works, this time for a sensible suggestion on the current financial mess.

“Nationalize the rating agencies!” he says, and it makes my heart swell. Leonard explains that when in 1970 the SEC decided to penalize brokers for holding less-than-investment-grade bonds, it designated three private firms as official bond-rating agencies, effectively outsourcing its regulatory responsibility. This created a glaring conflict of interest:

The creators of new securities pay the agencies to get their "paper" rated. But if they don't get the Aaa "investment-grade" rating that they desire from one agency, they might just take their business to another. The structural imperative of the market forced the ratings agencies to give everyone a gold star.

So, says Leonard, let’s insource the ratings game. With the financial wizards of the “free” market showing themselves incompetent to understand the very things they were buying and selling, the claim that the free market is wiser than government rings particularly hollow right now. As Leonard notes, nationalizing the credit-rating agencies might actually save us taxpayers some money, by forestalling more bailouts of investment banks.

Which brings us back to children and babies, since it’s our kids who will be paying off the national debt incurred from things like bailing out Bear Stearns. Really, it’s like the Kevin Bacon game—everything comes back to poopy diapers. They are, after all, where we all begin and end.