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Old 06-10-2008, 07:39 AM
 
Location: Sacramento
13,938 posts, read 25,279,164 times
Reputation: 6803

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Quote:
Originally Posted by rlchurch View Post
Amen to that they should be at the bar for rating those securities as investment grade. They should have been unrated junk all along. S&P, Moody, and Fitch have a horrible conflict of interest. They are paid by the issuer to rate securities. I think there's fraud involved and I'd like to see the rating agencies blistered.
I'd like to see them raked over the coals in Congressional hearings. The conflict of interest that you point out has troubled me for many years. It seems to me that the payment to those rating agencies should absolutely not be coming from the organization issuing the bonds. It would appear that for a "continuing business relationship" Fitch, S&P and Moody would be inclined to try and make the grading higher, lowering the cost of borrowing.

This whole process absolutely stinks, and I say this as one who is very pro business and free market. For the markets to work correctly, risk needs to be accurately determined and priced. Had that happened in the mortgage market, the pricing would have prevented the problem from ever occurring in the first place.

The loans simply would have been too expensive.
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Old 06-10-2008, 08:17 AM
 
Location: Washington DC
5,915 posts, read 7,633,225 times
Reputation: 954
Quote:
Originally Posted by NewToCA View Post
I'd like to see them raked over the coals in Congressional hearings. The conflict of interest that you point out has troubled me for many years. It seems to me that the payment to those rating agencies should absolutely not be coming from the organization issuing the bonds. It would appear that for a "continuing business relationship" Fitch, S&P and Moody would be inclined to try and make the grading higher, lowering the cost of borrowing.

This whole process absolutely stinks, and I say this as one who is very pro business and free market. For the markets to work correctly, risk needs to be accurately determined and priced. Had that happened in the mortgage market, the pricing would have prevented the problem from ever occurring in the first place.

The loans simply would have been too expensive.
The rating agencies need to be responsible and accountable to the people buying the securities not the people selling the securities. I doubt that investors could even successfully sue S&P over this con job. It's a huge institutional problem that the SEC has been remiss about addressing.
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Old 09-21-2008, 07:57 PM
 
3,891 posts, read 4,663,701 times
Reputation: 2472
Default Argument settled

Quote:
Originally Posted by Grizzmeister View Post
Most honest big-time economist are moving away from a completely free market economy model. They realize the consequences of the inevitable corrections are too severe to the greater wellbeing of a nation. This is by no means a new concept as it was realized long ago that monopolies are also detrimental to the greater good of a nation. Completely free markets sound good in theory but are impractical in reality. Thriving economies with long term vision need to be managed by leaders with integrity. Isn’t that what our present economic situation is proving as fact?
Prophetic words from yours truly. Sorry for the thread necromancy but I just couldn’t resist.
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