Reform Recommendations from Steve Forbes

October 26, 2009 by · Leave a Comment
Filed under: Bond Regulation, The Ratings System 

I agree with Steve Forbes’s comments in the article below. I think he has a point.

Let’s have people be responsible for their own decisions.

Let’s have fiduciaries resume their roles.

As a matter of theory, I agree.

But is it practical to un-endorse the NRSROs and blow up the current ratings infrastructure?

Ratings are completely intertwined in the financial system. Whatever emerges to replace it would take time. What about the interim? For example: What would financial institutions and their regulators use to evaluate bond portfolios, next quarter? Without an NRSRO rating, are all bonds unrated? Are they then all “toxic”? Are they then all classified?

We have to repair the existing use of ratings, or throw them all out. But if we throw them out, we need something, some rules of the road to get us through the interim.

Rating Agencies? Still, October 26, 2009

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