Ratings conflict

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Uploaded by on Jan 15, 2010

Ratings agencies are paid by the sellers of the securities they rate. Critics say there's a conflict of interest there. Senior Editor Paddy Hirsch explains.

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Education

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  • @cantroos that obviously proves how regulators failed by making idiotic regulations. Free market will get the blame.

  • To succed we have to think positive, if rating agencies are in market for number of years that means something is good or bad in it. Because it is created by human beings.it always be their at every time when ever we develop a product like apple iphone .

  • im another fan of yours...Thanks a lot

  • @jwrussert Because a company can pick anyone it wants to rate their security. It's not mandatory to get an issue of bonds rated, but if they don't, then many big pension and mutual funds will not be allowed to invest in it, and so they'll have a very difficult time selling it on the market for a reasonable price. The majority of the volume in the market is big institutional investors, they are bound by tons of rules as to what they can invest in.

  • Can anyone explain to me why it is that the three ratings agencies compete for assets to rate?

    I don't really understand why the companies get to choose a ratings agency.

  • Ratings agencies will have to become more transparent...meaning that the agencies that weren't strict on ratings will be burned...and other agencies can fill the spots.

  • I avoid "high yield bonds," I also avoid most of the "investment grade bonds,"....my "bonds" tend to be TVA's or gas LP's.....Ginnie Maes are good...but the yields are kinda low.

  • mmm this gave me lots of business ideas.

  • Yes, so the solution is no solution at all, except to ignore the rating agencies and do independent research.

    Thanks for posting.

  • Thank you ever so much for the service you give to us. No ingredient in the solution to the world's problems is more important than understanding.

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