Shopping for Ratings

June 29, 2010 by · Leave a Comment
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Good piece from the WSJ on how things have changed…or not…with regard to the conflict of interest that exists when the issuers are the ones that pay the fees of the rating agencies.  Whether ratings shopping, biases, etc. actually exist or not, the perception and possibility of this sort of behavior will always be present as long as the issuer pay system prevails.  A user pay system – where investors fit the bill for the ratings they use, not the issuer – removes all possibilities of this type of conduct. But is it viable as a commercial enterprise?

‘Ratings Shopping’ Lives as Congress Debates a Fix – Wall Street Journal, May 24, 2010

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