Mission impossible for ratings

David Rowe
24 Jun 2011

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It is widely recognised that credit rating agencies failed miserably in their mission to provide credible evaluations on the quality of highly structured residential mortgage-backed securities. Many argue this failure was a direct result of conflicts of interest inherent in the ‘issuer pays’ structure of the rating market.

While there is an element of truth in this view, it fails to capture the whole story. The only fully credible path the rating agencies could have taken was to refuse to wade

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