Is the financial overhaul law wreaking havoc on asset-backed securities?

Something odd is happening in the asset-backed securities market. The three biggest ratings agencies -- Moody's, Fitch and S&P -- are telling clients that because the financial regulatory law introduces new liability for the agencies, issuers can't use the agencies' opinions in documents registering new bonds, even though the law requires such ratings to be cited.

The result? Traders say the asset-backed securities market has come to a grinding halt because without the agencies' opinions, bond issuers can't sell their new products. As the Wall Street Journal reports today, Ford Motor Co. has already aborted plans for a new debt offering because of the confusion.

"It's a disaster," said Joseph Lorusso, founder of Structured Finance Advisors, an investment management firm. "Everybody's trying to figure out how to get around it."

Everyone's also wondering whether the Securities and Exchange Commission will step in and ease the logjam, perhaps by suspending some of the rules. In the meantime, issuers may shift to private deals to get around the SEC's regulations.

UPDATE: The SEC resolves things for the time being.