With today's news that Scott Brown is going to throw himself into machine and derail the Financial Reform Bill because it, gasp, has a tax on Banks, it seems the conference negotiators are going to have to think of a new way to raise revenue to pay for the bill.
So here's an idea:
An Inaccuracy Tax on the Ratings Agencies.
More after the jump...
I submitted this idea to the White House website a few days ago, still waiting for a response.
ANYWAY, the nitty-gritty is that all rating Agencies will be evaluated for the accuracy of their ratings on a rolling 2-year average, which also takes into account the size of securities, debt, or other products that the agencies got wrong or right. For a certain percentage of the ratings agencies below the accuracy threshold, like the bottom 50 percent, would be subject to a transaction tax on ratings they sell until their accuracy brings them into the upper 50 percent.
This kills 2 birds with one stone. On one hand, ratings agencies will have a real incentive to not screw up their ratings (they can advertise that they are "inaccuracy-tax free!"). And this will raise revenue to pay for the bill.
I hope someone in power reads this and passes it along.
Peace.