The federal government reportedly will allow The Hartford Financial Services Group Inc. and other insurance carriers to apply for federal funding through the Troubled Asset Relief Program. In late March, Moody”™s Investor Service downgraded corporate debt owed by The Hartford, an action disputed by the company.
Connecticut Attorney General Richard Blumenthal launched an investigation into why the federal government is steering up to $400 million to the three largest credit-rating agencies, which Blumenthal blames for contributing to the economic meltdown by overrating risky securities.
As part of the Term Asset-Backed Securities Loan Facility intended to restart consumer lending, financial institutions must have new securities rated by multiple “major nationally recognized statistical rating agencies.” Because Moody”™s, Fitch Inc. and Standard & Poor”™s Financial Services L.L.C. are the only credit raters that meet those criteria, Blumenthal said, the requirement effectively shuts out seven other ratings companies from as much as $400 million in possible fees.
“The same Big Three that overrated bonds now regarded as toxic assets will be rating new bonds issued to restart lending and solve the economic crisis they helped create,” Blumenthal said, in a prepared statement. “The Federal Reserve is rewarding the same companies who helped burn down the house.”