Saturday, February 09, 2008

WHY THE RATINGS AGENCIES ARE MORAL HAZARDS

(h/t Mark Thoma at Economist's View)

Short and sweet, from The Economist:
Such stabs at self-healing may not placate everyone. Some point to more profound concerns: because ratings are deeply embedded in financial regulation, the agencies have been handed an oligopoly; they suffer a conflict of interest, because they are paid by the issuers of the securities they rate, not by investors; and they are unaccountable because their ratings are deemed mere opinions and thus protected as free speech.

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