About Us

Six months ago, we brought mark-to-market accounting issues to the forefront of public attention with MarktoMarketDebate.com. This initiative culminated in Rich Berg’s testimony to Congress about the much-needed modifications to accounting regulations. Heightened public awareness of the problems led the Financial Accounting Standards Board (FASB) to issue new guidance in April for fair value accounting rules.

Now, we’re broadening the debate to include bond ratings. Under the current ratings system, securities are given a letter rating to signify the likelihood that they will default. While this system is sufficient for single-obligor securities, it does not work as well for multi-obligor securities. Due to the complex structure of multi-obligor securities, the ratings assigned to them do not accurately reflect the economic effects if they default. As such, the investor is less able to analyze these securities.

The fact that many investors did not complete the due diligence portion of the investment process certainly contributed to the economic crisis, as did factors such as the deterioration of home loan standards and the inaccurate evaluations that were issued by the ratings system. While the issues within the ratings system remain unresolved, investors and institutions continue to purchase securities under a false impression of their potential to default, with potential irreversible consequences for their organizations.

How did the problems with the ratings system come about? How should we go about solving these problems? What’s the best course of action to ensure bond ratings will never be inflated again?

These are just some of the questions with which this site will wrestle in the weeks to come. Not only for bonds in the real estate sector, but for all bond ratings in general.

We look forward to your participation in this frank and candid discussion of what went wrong and what we should do next.

Let the Ratings Debate begin.