Greenspan on Dodd-Frank: Start Over
By David Henderson
As I noted yesterday, in his Friday talk at the Hoover Institution, Alan Greenspan advocated two policies. The second is to scrap the Dodd-Frank financial regulation law and start over. The law, said Greenspan, “is unimplementable.”
He went on to highlight one major problem that law has already caused. When he said that, I whispered to the person beside me: “Ford.” Indeed, that’s what Greenspan highlighted. Ford Motor Credit had been ready to float $1 billion in debt, he said. But under Dodd-Frank, any credit rating agency that certified the bond issue would be partially liable in case something went wrong. So, of course, credit rating agencies refused to certify and the debt issue could not go forward.
What to do? The staff of the Securities and Exchange Commission promised not to bring the issue up to the commission. Here’s the “No Action” letter that Katherine Hsu of the SEC wrote to Ford Motor Credit on November 23, 2010 and here’s a key section:
We understand that the rating agencies continue to indicate that that they are not willing to provide their consent at this time, and that without an extension of our no-action position, offerings of asset-backed securities would not be able to be conducted on a registered basis. Given the current state of uncertainty in the asset-backed securities market and the benefits to investor protection resulting from Securities Act registration, the Division is extending the relief issued to you by letter dated July 22, 2010. Pending further notice, the Division will not recommend enforcement action to the Commission if an asset-backed issuer as defined in Item 1101 of Regulation AB omits the ratings disclosure required by Item 1103(a)(9) and 1120 of Regulation AB from a prospectus that is part of a registration statement relating to an offering of asset-backed securities. [bold mine]