The Time To Act Is Now

October 12, 2009 by · Leave a Comment
Filed under: General 

There is plenty of blame to go around for the bond rating problems, and some hard decisions need to be made to ensure the problems we have today with multi-obligor bonds never happen again.

Although it is wrong to hold the ratings agencies entirely culpable, that is probably where most of the changes need to take place. The agencies need the tools, both the analytic models and the rating convention, to accurately assess the risk and value of a multi-obligor bond.

In many respects, we need the ratings agencies to protect us from ourselves — from our rosy outlooks, our sloppy investment research, our distractions, our peccadilloes. We desperately need them to be able to do a good job.

The real catastrophe will be if the industry is unable to fix these deficits ourselves. So we need to act now. If the government fills the void with more regulation and more bureaucracy, it may be decades before we can again enjoy the growth and success we enjoyed before the fall.

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