And everybody’s favorite, Barney Frank, comes to Bill Lockyer’s rescue with The Municipal Bond Fairness Act. Because its all about fairness. If the credit rating agencies are giving government bonds risky ratings, the force of law to increase government bond ratings is justified, you see.
The credit rating agencies are, you see, discriminating against government agencies. Bill and Barney are buddies.
As far as I can tell:
1. Governments operate under less stringent accounting standards than private enterprises.
2. The credit rating agencies take this into account and issue lower ratings for a set of government numbers than they do for a set of private numbers (this practice must be ended by H.R. 6308).
3. Governments want to take past rates of default into account, instead of future projected rates of default into account.
H.R. 6308 was introduced to committee last month.
Update: My link to the legislation doesn't work. Google H.R.6308.