• The Political Commentator
The issuer of a bond pays the rating agency to rate the bond? Conflict of interest?
Why doesn't a defendant just pay the salary of the judge presiding over his case?
That would certainly make no sense! The same way that a rating agency making its money from the issuer whose bonds they rate makes no sense.
How can the rating agency possibly be 100% objective when they want to get repeat business from the issuer?
The answer is that they can't be, and yet that is the system for rating bonds, and it has always been the system.
However, in the case of the 2008 financial crisis that included a massive dollar amount of AAA rated crap (CMBS) and a huge number of investors around the world hurt by this system, the problem is now too great to be ignored.
Join us on our
Share this page with your friends
on your favorite social network: