5 ms·
Tricky problem to solve. Maybe we don’t need ratings at all. Investors should simply perform their own DD on any deal as they naturally would. We can still rank
by formercoder 7y ago
Tricky problem to solve. Maybe we don’t need ratings at all. Investors should simply perform their own DD on any deal as they naturally would. We can still rank companies on factors like leverage and coverage ratios for comparison purposes.
- tbrownaw 7y agoThe trouble is when they're managing money for other people who done have a say - pension funds or whatever - and the government wants to have some way to regulate them. Because not restricting then from "dangerous" things would bad, whether or not it actually helps. (And with the way things went bad when the regulation stopped working, maybe it even does help?)
- jpmattia 7y agoI don’t think it’s at all tricky to solve: Don’t believe ratings from people who are not investing their own money. E.g., VCs in later rounds make sure that VCs from earlier rounds put in pro rata, because investing actions speak louder than words. Until the misaligned incentives of the rating agencies get fixed, the ratings are really not worth the paper they’re printed on.
- notfromhere 7y agoInvestors don't have the manpower to do their DD on every bond issue they buy. You need to remove the ability of bond issuers to shop for credit agencies