Here's a thread about the new Federal Reserve programs that rely on credit ratings. I hope it's helpful to someone out there. I've included citations so it's easy to follow everything in one spot.

/2 In Dodd-Frank, Congress removed all of the reliance on credit ratings that it could find in the U.S. Code. It didn’t find all of the references, but it found quite a few. Good work, Congress. See Dodd-Frank 939; https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2969086.

/3 Congressional staffers knew there were other federal rules that relied on credit ratings, so Dodd-Frank also required regulators, including the Fed, to review their regulations and remove all references to credit ratings. They had a year to do it. See Dodd-Frank 939A.

/4 The Fed found 46 references to credit ratings, but didn’t see anything in Section 13(3) of the Federal Reserve Act, which permits it to lend during “unusual and exigent circumstances.” See https://www.federalreserve.gov/aboutthefed/section13.htm.

/5 In other words, the Fed concluded that there is no reliance on credit ratings in Section 13(3). No credit ratings here, Congress. Please move along. See https://www.federalreserve.gov/publications/other-reports/credit-ratings-report-201107.htm.

/6 Now the Fed is relying on credit ratings to make decisions about lending hundreds of billions of dollars under Section 13(3). For example, here's the new “TALF” program: https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200409a1.pdf.

/7 There's language like this: "the highest short-term investment-grade rating category from at least two eligible nationally recognized statistical rating organizations (“NRSROs”)." See https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200409a1.pdf.

/8 Or this: "do not have a credit rating below the highest investment-grade rating category from an eligible NRSRO.” See https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200409a1.pdf.

/9 The $2.3 trillion program the Fed announced today has lots of references to credit ratings. See https://www.federalreserve.gov/newsevents/pressreleases/monetary20200409a.htm.

/10 This is not going to end well.