Reforming the Selection of Rating Agencies in Securitization Markets: A Modest Proposal

摘要

The bond markets are largely institutional markets, with professional bond portfolio managers' representing the bulk of buying/selling transactions. In principle, these professionals should have memories and thus be able to pay attention to rating agencies (or other assessors of creditworthiness) that have good "track records" and ignore those whose past performances in rating the creditworthiness of debt instruments have been poor. In turn, this should motivate the rating agencies to pay attention to their long-run reputations and to foreswear the short-run temptations to cater to issuers' desires for unduly favorable ratings (and minimal subordination levels) in return for getting the issuers' business.