As the TALF plan cranks up the volume from a measly $200 billion to $1 trillion, the big winners look to be the ratings agencies.TALF, aka the Term Auction Lending Facility, was created to help the companies and businesses that couldn't get money from the credit markets -- the money they in turn lend to consumers. Lenders can put up a wide array of questionable collateral to borrow this money. This is where the ratings agencies enter the picture. The government insists it is working to minimize the risk to taxpayers and is hiring companies like Moody's ( MCO), Fitch ( FIM.FP) and Standard & Poor's, which is owned by McGraw-Hill ( MHP), to check out the collateral and deem it worthy.
Do we trust that Citigroup is only using the good customers to back these loans? Do we trust the agencies to tell Citigroup "no way" when the agencies want the fees and the government desperately wants this program to kick in? Both S&P and Moody's are the subjects of lawsuits regarding past erroneous product ratings. The new SEC rules suggesting changes at the agencies have been proposed, but not yet adopted. Hmmm. Is there any bonus money buried here?