Famine and Feast
Although the Credit Rating Agencies (CRAs) haven’t been blamed for world famine there isn’t much else that hasn’t been laid at their door. With good reason, for without the co-operation of the CRA’s the vast explosion of securitised loans which eventually imploded in 2008 couldn’t have occurred.
Unfortunately the rating agencies may be the least of all evils, and we can at least trace the paths through which their ratings were compromised. Free market believers, though, should look away now because the failure of the CRAs is another example of market failure. More competition led, not to better ratings, but to a race to the bottom of a very deep pit.
Although the Credit Rating Agencies (CRAs) haven’t been blamed for world famine there isn’t much else that hasn’t been laid at their door. With good reason, for without the co-operation of the CRA’s the vast explosion of securitised loans which eventually imploded in 2008 couldn’t have occurred.
Unfortunately the rating agencies may be the least of all evils, and we can at least trace the paths through which their ratings were compromised. Free market believers, though, should look away now because the failure of the CRAs is another example of market failure. More competition led, not to better ratings, but to a race to the bottom of a very deep pit.
