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Aren't the rating agencies a counter example of the success of this model? They have proved that private market "over-site" is just as susceptible to influence
by mschwar99 16y ago
Aren't the rating agencies a counter example of the success of this model? They have proved that private market "over-site" is just as susceptible to influence of the regulated.
A flavour of this idea already exists inside the government and it has lead to a race to the bottom not increased accountability. Large corps are free to choose whom their primary regulator is.
Interesting take on from This American Life on the effects of the Office of Thrift Supervision's efforts to market themselves to businesses as a regulator.
http://www.thisamericanlife.org/radio-archives/episode/382/The-Watchmen http://www.thisamericanlife.org/radio-archives/episode/382/T...
- stretchwithme 16y agoThee's definitely some truth to that. And debt issuers are paying for their own ratings. I think, though, that perception of risk is highly distorted by bubbles. Its the success of risk takers that's convincing everyone else to buy and join them in taking even greater, but misperceived risks. But the rating agencies still give all different kinds of debt different ratings. Not every bond is getting rated AAA. Plenty get a junk rating as well. And with government and quasi-government Fannie and Freddie encouraging unreasonable lending and hiding risk through repackaging, it doesn't surprise me risk was hidden even from these agencies. But I don't know if misperception of risk is quite the same problem as regulators being influenced to ignore questionable practices.