Credit Ratings Corporations seem to have been operating for decades with an inherent conflict. As readers of past posts in this space know well, Credit Ratings Corporations rated the credit of Bond Insurance Companies in particular. Their role in rating the credit of Bond Insurance Companies is suspect in the eyes of many.
Credit Ratings Corporations were, and apparently still are, paid by the corporations whose credit they rate. The seemingly precipitous downfall of Credit Ratings seems to be evidence that the Credit Ratings Corporations did not dare to downgrade the Credit of the Corporations which paid the bills. See this outstanding newspaper column by Michael Lewis and David Einhorn, "The End Of The Financial World As We Know It" p. 9, col. 1 (New York Times Nat'l Ed., Week in Review Section, Sunday, January 4, 2009). Other ramifications of this apparent conflict are the subjects of an extensive post on www.insuranceclaimsissues.typepad.com.
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