Monday, August 2, 2010

Kilroy screwed up. Bad.

Did you hear about the time Mary Jo Kilroy brought the $1.4 trillion asset-backed securities market to a "screeching halt"? No? Oh, good. Sit back and prepare to be wowed.

Over the past couple months, Mary Jo Kilroy has crowed about her involvement in "Wall Street reform".

She raised money off it. She put out press releases about it. And now she may regret it.


Because it's costing an untold number of jobs and putting a massive dent in the economy.

From the Wall Street Journal:
The financial genius behind this section of Dodd-Frank is Representative Mary Jo Kilroy. The Ohio Democrat inserted a line in the bill that removes the exemption for credit raters like Standard & Poor's and Moody's from being considered "expert" advisers in judging securities offerings. This makes them closer to underwriters or accountants in vouching for an issued security, and it means that their consent is required before their ratings can be included in a registration statement filed at the Securities and Exchange Commission.

Coincidentally—and Ms. Kilroy has said this was her motivation—the provision also sharply increases the potential liability for credit rating firms. Both S&P and Moody's cited this enhanced liability in announcing that they would not consent to participating in SEC asset-backed securities registrations. Fitch, DBRS and others followed suit.

Oops. Billions of dollars of deals were scrapped, as issuers were barred from proceeding without ratings information and the raters weren't willing to participate. A June press release still appears on Ms. Kilroy's website, proudly noting that her amendment "adds teeth to Wall Street reform." Did it ever.

The market remained frozen until late on July 22nd when the SEC staff rushed out an announcement that they were suspending enforcement for six months of its rule that ratings information be part of securities offerings.
We'll never know how many jobs this cost and the overall impact it made on the economy. But thanks to Kilroy, we know "billions of dollars of deals were scrapped".

Awesome. Just awesome.

It's no wonder the WSJ implied that if Kilroy was a CEO, she'd be fired for incompetence.

No question about it - this was a major screw-up.

And thanks to actions like this, it's no wonder the Washington Post said Kilroy was "in deep trouble".

She's simply in over her head.

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