This brief but important article from economist Alice M. Rivlin and analyst John B. Soroushian presents a unique slant on the flaws in the current credit rating system for traded securities, a little-discussed but critical topic, given the credit rating agencies’ outsized role in contributing to the 2008 financial crisis. getAbstract recommends this timely reminder of a crucial issue still pending resolution to fixed-income analysts, credit risk managers, economists and financial professionals.
In this summary, you will learn
- Why the credit rating system is inherently flawed and fraught with conflicts of interest,
- How inflated credit ratings on debt securities helped spark the housing bubble and 2008 financial crisis, and
- What reforms are necessary to help make the credit rating system more credible and independent.
About the Authors
Alice M. Rivlin is a senior fellow in economic studies and health care policy at the Brookings Institution. John B. Soroushian is a senior policy analyst at the Bipartisan Policy Center.