SEC NRSRO Causes Asset Mispricing?

When is the government not the answer?

When it caused the problem in the first place.

Bailouts are bad for the same reason that other government interventions are frequently bad, because the quick cry for government regulation often overlooks the embarrassing fact that, not only did a financial disaster occur under the government's watch, but government regulation actually caused or worsened the financial disaster.

The global credit crisis resulted from the subprime mortgage mess partly because the big ratings agencies mis-priced the financial assets and risk:

"But when it comes to using ratings, many large investors' hands are tied. Pension funds, banks and insurance companies can only buy debt that's been rated by a Nationally Recognized Statistical Rating Organization. NRSRO for short. The Securities and Exchange Commission awards that seal of approval. Until just a few years ago, the only NRSROs were, you guessed it, Standard and Poor's, Moody's and Fitch. Joseph Mason teaches finance at Drexel University" (Marketplace radio program).

Those big 3 SEC favorites retained an implicit government-approved authority which they used to rubber-stamp the housing bubble's gross overpriced mis-valuations of homes and mortgage-backed securities (MBS).

Meanwhile, the rating company Egan-Jones has been trying unsuccessfully to get the NRSRO certification but the SEC has shut-out Egan-Jones for 10 years while various accounting and financial scandals occurred under the SEC's watch:

[Sean Egan stated:] "With Enron and Worldcom we were often times the lone voice raising these concerns."

US Federal government financial regulations discouraged consumers/shareholders from using accurate information.

The government's hand in creating the global asset bubble and credit crisis does not instill any confidence that any of its bailout plans will make economic conditions better. The bailouts might make the economic situation worse.