I also saw this on ZeroHedge and thought it was a bit alarmist. I’m assuming this will get fixed, but I find the whole thing hilarious. Here’s the breakdown:

1. FinReg says that if an expert says an instrument filed with the SEC is a good investment, then the expert is liable if it isn’t.
2. There was language exempting the ratings agencies, but it seems to have gone missing in the final version.
3. The ratings agencies are circulating memos to remove their ratings from bond deals filed with the SEC.
4. Actual deals have been shelved.

Again, I’m pretty sure the ratings agencies will be allowed to continue making inflated assessments of things without ever being liable. But consider what this says about our current economy. Everything can grind to a halt if there is a penalty for dishonesty. Is it possible that AAA isn’t as safe as the ratings agencies would like us to believe? Does the concept of a conservative evaluation of an investment instrument cause everything to fall apart?

Awesome.