4 ms·

Because the financial ratings agencies have proved to be such a huge success?

Retric 12y ago
US raiting agency's are setup to be corrupt as the seller pays the raiting agency so there going to look for the loosest respectable option. And the agency has little incentive to dig deep.
- woodman 12y ago
  Setup by the SEC. The incentives are structured, by the government, in the most ridiculous way possible. Pointing at the failure of government mandated and monitored rating agencies as a failure in private enterprise is just stupid.
  - Retric 12y ago
    I think it's more nuanced than that. Private companies optimize for money, with the right incentives they work well, with poor incentives they become a pointless money sink. All too often you see the equivalent of “though the magic of the invisibly hand we will solve X.” But, without the proper incentives simply privatizing or reducing regulations are going to do little but line someone’s pockets.
    - woodman 12y ago
      > But, without the proper incentives simply privatizing or reducing regulations are going to do little but line someone’s pockets. Well, that is true every system - including functions of government. It has nothing to do with privatization vs nationalization. The government mandates that certain financial instruments must be rated by a short list of companies that have been blessed to do so. So the government has limited competition among rating agencies, a laughable mistake in judgement. Then these companies only get paid by the folks trying to sell the instrument under review... another stupid move. Many government programs, presumably setup with the best intentions, have serious negative consequences because the moron behind it didn't think more than one step ahead. This happens in private industry as well, the difference being that there the market corrects for mistakes by mercilessly crushing fools. In government the fools live on, and their plans are slow to change because it is now law.
      - Retric 12y ago
        'the moron behind it didn't think more than one step ahead' I think many and possibly most of these are based on regulatory capture where elected officials / regulators are ‘given incentives’ to look the other way. Lots of seemingly stupid decisions are completely reasonable from the person who made them. All it takes is for someone to be judged just on their little piece of what happens (how much do we spend on paper) and not judged based on how much their changes hurt the corporation/overall economy etc. And before you know it, we saved 1million in ink last year at the cost of 50 million in manpower.
        woodman 12y ago
        > Lots of seemingly stupid decisions are completely reasonable from the person who made them. Lol, good intentions are worth absolutely nothing. Your misallocation of resources story isn't really helpful either, if you think the SEC made a great move in structuring financial instrument ratings - explain it.
        Retric 12y ago
        That's not what I meant. It's not 'good intentions' vs 'reality' it's 'selfish intentions' +'bad measurement' = 'WTF rules'.
        woodman 12y ago
        Ah, well that is a consequence of poor planning by the well-intentioned. Here, I'll show you: People are bad, therefor we need a government made of people are bad, therefor we need a government made of people are bad...
nickff 12y ago
Perhaps this proposed drug testing regime would be more comparable to auditing firms.[1] Arthur Andersen went under after it lost credibility in the eyes of shareholders, as a result of the Enron scandal. On the other hand, from everything I have read the ratings agencies were simply 'going through the motions', and cashing in on their government mandated service. No large investors trusted the ratings agency to begin with, the investors were all gaming the system, and the agencies were playing along to get a piece of the action.[2] [1] http://en.wikipedia.org/wiki/Big_Four_(audit_firms) http://en.wikipedia.org/wiki/Big_Four_(audit_firms) [2] http://en.wikipedia.org/wiki/Big_Three_%28credit_rating_agencies%29 http://en.wikipedia.org/wiki/Big_Three_%28credit_rating_agen...

US raiting agency's are setup to be corrupt as the seller pays the raiting agency so there going to look for the loosest respectable option. And the agency has little incentive to dig deep.

woodman 12y ago
Setup by the SEC. The incentives are structured, by the government, in the most ridiculous way possible. Pointing at the failure of government mandated and monitored rating agencies as a failure in private enterprise is just stupid.
- Retric 12y ago
  I think it's more nuanced than that. Private companies optimize for money, with the right incentives they work well, with poor incentives they become a pointless money sink. All too often you see the equivalent of “though the magic of the invisibly hand we will solve X.” But, without the proper incentives simply privatizing or reducing regulations are going to do little but line someone’s pockets.
  - woodman 12y ago
    > But, without the proper incentives simply privatizing or reducing regulations are going to do little but line someone’s pockets. Well, that is true every system - including functions of government. It has nothing to do with privatization vs nationalization. The government mandates that certain financial instruments must be rated by a short list of companies that have been blessed to do so. So the government has limited competition among rating agencies, a laughable mistake in judgement. Then these companies only get paid by the folks trying to sell the instrument under review... another stupid move. Many government programs, presumably setup with the best intentions, have serious negative consequences because the moron behind it didn't think more than one step ahead. This happens in private industry as well, the difference being that there the market corrects for mistakes by mercilessly crushing fools. In government the fools live on, and their plans are slow to change because it is now law.
    - Retric 12y ago
      'the moron behind it didn't think more than one step ahead' I think many and possibly most of these are based on regulatory capture where elected officials / regulators are ‘given incentives’ to look the other way. Lots of seemingly stupid decisions are completely reasonable from the person who made them. All it takes is for someone to be judged just on their little piece of what happens (how much do we spend on paper) and not judged based on how much their changes hurt the corporation/overall economy etc. And before you know it, we saved 1million in ink last year at the cost of 50 million in manpower.
      - woodman 12y ago
        > Lots of seemingly stupid decisions are completely reasonable from the person who made them. Lol, good intentions are worth absolutely nothing. Your misallocation of resources story isn't really helpful either, if you think the SEC made a great move in structuring financial instrument ratings - explain it.
        Retric 12y ago
        That's not what I meant. It's not 'good intentions' vs 'reality' it's 'selfish intentions' +'bad measurement' = 'WTF rules'.
        woodman 12y ago
        Ah, well that is a consequence of poor planning by the well-intentioned. Here, I'll show you: People are bad, therefor we need a government made of people are bad, therefor we need a government made of people are bad...

nickff 12y ago

Perhaps this proposed drug testing regime would be more comparable to auditing firms.[1] Arthur Andersen went under after it lost credibility in the eyes of shareholders, as a result of the Enron scandal. On the other hand, from everything I have read the ratings agencies were simply 'going through the motions', and cashing in on their government mandated service. No large investors trusted the ratings agency to begin with, the investors were all gaming the system, and the agencies were playing along to get a piece of the action.[2] [1] http://en.wikipedia.org/wiki/Big_Four_(audit_firms) http://en.wikipedia.org/wiki/Big_Four_(audit_firms) [2] http://en.wikipedia.org/wiki/Big_Three_%28credit_rating_agencies%29 http://en.wikipedia.org/wiki/Big_Three_%28credit_rating_agen...