Some suggest replacing corporate and sovereign ratings with credit-default-swap prices, but these too can be procyclical.

ECONOMIST: Reducing reliance on ratings is a worthy goal, but not easy

But then the combined effects of the procyclical accounting and regulatory rules took over and turned the hoped-for soft landing into a very turbulent ride.

FORBES

Congress established a highly procyclical method for assessing FDIC premiums.

FORBES

Allowing loan securitizations, derivatives, and swaps to be taken off bank balance sheets was an important element in this, as were the procyclical rules on capital and loan loss reserves.

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Instead, the FDIC behaves in a procyclical manner.

FORBES: Magazine Article

Reliance on market forces and models led the SEC to challenge the judgmental approach to establishing loan loss reserves and to the creation of procyclical models that understate reserves in good times and overstate them in bad times.

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Ratings are also procyclical, he says.

ECONOMIST: Reforming finance: Rating agencies

The additional employment due to the Recovery Act has therefore almost certainly produced relative expansion of such procyclical sectors, while countercyclical sectors, such as utilities, health care, and government, have seen their shares of total employment shrink relative to what would have been seen in the absence of stimulus.

WHITEHOUSE: Recovery Act Third Quarterly Report - Supplement | The White House

Overreliance on markets and models led the SEC and its sidekick FASB to put into place the highly procyclical and ultimately very destructive market-to-market accounting system, despite strong warnings from the secretary of the Treasury, the chairman of the Fed and the chairman of FDIC that it would create greater volatility in banking and lead to severe credit crunches.

FORBES