We told you last month about the role of the credit ratings agencies in helping to cause the financial crisis. A major part of the problem, in a nutshell, is that the major ratings agencies — Moody’s, Standard & Poor’s, and Fitch — are paid by the institutions (often investment banks) who are issuing the bonds. That gives the agencies a clear incentive to produce favorable ratings, or risk seeing the banks hire a different ratings agency that’s willing to offer a better rating.
This is a companion discussion topic for the original entry at https://talkingpointsmemo.com/?p=172508