On 8/16/07, Jim Devine <[EMAIL PROTECTED]> wrote: > On 8/16/07, Doug Henwood <[EMAIL PROTECTED]> wrote: > > Firms pay for their ratings! - Doug > > then why does anyone trust these ratings? >
I don't think anyone really trusts them. As you say, the three main rating agencies are part of the game in the very real sense that securities law explicitly gives them a special status as Nationally Recognized Securities Rating Organizations (NRSROs). So for instance pension funds cannot buy anything that is not certified credit-worthy by Moody's or S&P. Other countries also have similar laws recognizing the same companies, making them extraordinarily powerful. Here's a very nice introduction to the rules of the game: http://www.businessweek.com/magazine/content/02_14/b3777054.htm -raghu.
