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If contracts and regulations require AAA-rated securities, then AAA-rated securities will appear to match the demand. As the author rightly points out: we have
by zipdog 15y ago
If contracts and regulations require AAA-rated securities, then AAA-rated securities will appear to match the demand.
As the author rightly points out: we have too many groups requiring AAA-rated securities and not enough real AAA stuff to go around, so most of the AAA ratings are going to be unreliable.
- mtoddh 15y agoIf contracts and regulations require AAA-rated securities, then AAA-rated securities will appear to match the demand. I believe that this is what is happening, but the argument that demand for AAA securities by overcautious investors is the root of the issue makes it sound like all of our problems could have been avoided by curtailing the demand itself- in this case, by encouraging investors to take on more risk (don't be overcautious!) and be willing to purchase lower-quality securities. As an investor, shouldn't I be able to choose what level of risk I'm willing to accept? And isn't it the job of rating agencies to provide accurate information so I that I can make an informed decision as to the level of risk I'm taking?