Saturday, April 24, 2010

The Role Of The Credit Raters In The Meltdown

Very interesting story here about the role of corporate culture at the credit rating agencies, one that drove analysts to continue to provide higher investment ratings on vehicles and products then their analysis would support--because of the fear of lost profits from those whose products were being rated.

We had a very well-informed caller on the show Wednesday night speak at length of the role of the credit rating agencies in the melt-down, and this article seems to back some of that up.

When I think of financial industry reform, I always talk about reforms that make the market "more free". In this case, the fact that these ratings agencies were very likely rating these vehicles improperly to support their own bottom lines--favored one side of a market transaction over the other. This is not a free market. Here is where government could have a salutary role in regulating the activities of the ratings agencies.


Goldwater's Ghost said...

Which had a bigger impact - the porn or the credit raters?

The Conservative Wahoo said...

Maybe porn is why the credit raters did their jobs so poorly?

Triple G said...

I thought it was the master raters that caused all the problems.

"The Hammer" said...

Some people have fantasies about walking to the plate at Yankee Stadium and smacking a 625 ft. homer over the right field facade. Some dream of a bicycle kick scoring the winning goal against the Italia Azzurri in the World Cup final.
I dream of being a hatchet man for the Federal Government. Sitting in the corner office, room full of haze while smoking an H. Upmann, calling them to slaughter one by one. I'd have a half dozen security guards (Brian Bosworth types, you know, big, mean and on the edge) ready to escort them to their desks and out the building. The look on their faces, the realization that the free ride is over, "The Man" is back in charge. Oh Lord that would be great! I'm getting a thrill up my leg just thinking about it.

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