In Soviet China, milk corrupts YOU!
I suggest a witty rebuttal instead of thoughtful insight.
Based on the sarcasm in your post, it seems that you don’t want private rating agencies because they can be corrupt.
If governments can be corrupt (as shown in the China example) why would you want potentially-corrupt-government more than potentially-corrupt-private?
I think it’s more like:
“Private rating agencies can be just as corrupt, if not more so, than public ones. So what is the benefit to moving from public to private”?
I already answered that: Because private ratings agencies exist in a competitive marketplace, and therefore are ‘regulated’. It’s the same reason why Apple doesn’t put clear plastic faceplates on their iPhones randomly to save money.
A ratings agency’s product IS their integrity. Lose that, and they lose the entire reason for existing. There are already lots of these types of companies around, and I’d put their record up against any government agency. For example, the American National Standards Institute, or ANSI. It’s a private standards certification agency that has an absolutely stellar record for compliance, accreditation and certification. So much so that the FCC has given ANSI authority to certify some electronics as FCC compliant.
There are hundreds of such certifying organizations. ISO, ISA, the BBB, Good Housekeeping Seal of Approval, you name it. Small certifying agencies, huge certifying agencies, professional auditing firms, etc.
Do they make mistakes from time to time? I’m sure they do. I’m sure you can find some that are corrupt. But I don’t think you’ll find any more corruption among private certifying agencies as you will in government.
Most of it will. That’s been the argument for decades, that if the government stops funding basic research that the private sector will take over. Instead, we’ve cut and cut basic research and nobody stepped in. More and more America is coasting on its past scientific accomplishments, relying on the pure faith that somehow the magic free market will make everything better, it’s sure to happen, any time now.
Yes, the BBB and the Good Housekeeping Seal of Approval are the equivalent of ISO certification.:rolleyes:
So you are saying government and private certifying agencies have the same level of corruption?
Did I say they were equivalent? I listed many examples of ratings agencies of all kind, and I specifically said “from small to large”. Are you being intentionally obtuse?
I didn’t say that either. I said they’re not perfect. The difference is that with government you have no choice. If you live in Chicago, you have to live with the Machine. In New York for a long time, the Teamsters ruled the roost, aided by their friends in government. You couldn’t get a permit to blow your nose unless you hired a Teamster to hold your hankie.
But if a private ratings firm has a history of getting it wrong, it will cease to exist.
The Soviet Union had protection of freedom of expression also.
I’ve read plenty of cases of corruption, but for many of these it doesn’t appear that the problem was that they paid off anyone, just that no one actually inspected them, and np one cared - until importing countries started to put checks in place which worked to slow down imports, which hurt the trade balance. The Chinese immediately denied everything, right?
That’s my strategy.
Those people who raterd those credit clusterfuck derivative buttswaps as “AAA” rated, thus opening the pursestrings of pension fund to the benefit of future Wal-Mart greeters? They out of business?
How’s that workin’ out for ya?
So, how did the bond rating agencies do on mortgage backed securities?
The Haggler column in the Times had 3 weeks worth of stuff about how the BBB let supporting companies off the hook. The question here is who pays for the certification, and who watches the agencies. Bond rating is paid for by the bond issuer, so to get repeat business the rating agencies often didn’t want to look at the bonds too closely. The proposal was to have a pool and have the bonds rated by an agency chosen randomly to avoid this conflict of interest. Do you support this change?
Without regulation of ratings agencies, wouldn’t a good business model be selling ones services to companies who don’t want to get rated too closely? The consumer for the most part looks for a seal and is not going to be able to evaluate the relative competence of the companies who provide a seal. No agency is perfect - even if something horrible happens, there would be plausible deniability. You might be able to avoid stuff like in China, but not stop companies cutting corners to save money.
If you doubt this would happen, you should look at the statements published supporting or opposing California ballot initiatives. Every side has some official sounding organization of cops, teachers, and firefighters for it. I suspect most are three random teachers or cops, but the strategy gets used year after year so I assume it works.
In the US the problem is less with corrupt inspectors than with budget cuts which make proper inspection impossible. Half the corruption cases I’ve heard of have been payoffs to avoid a company failing an inspection, not payoffs to pass one when one shouldn’t.
My wife worked as the quality control director of a vegetable cannery, and there was no fooling around. And this was in Louisiana, not the least corrupt of places.
Look who profits from letting things through, and you’ll see if a strategy is safe.
Good point.
So let’s pretend, for sake of argument, that it was actually a government agency that rating mortgage-backed securities and collateralized debt obligations. And let’s pretend that the government fucked up and the crisis played out as it did.
Would the government be out of business? I know it’s far fetched and difficult to conceptualize, but just for fun, think about your reaction if a government rating agency failed.
Maybe the lesson here should be that people building pension portfolios shouldn’t trust so blindly.
You’ve just restated modern centrist pragmatist orthodoxy. I doubt Barack Obama would disagree with your statement. Recall that President Clinton ordered all executive agencies to identify the market failure any given regulation was being promulgated to fix, and required them to justify why regulation was better than other attempts to fix the market failure, such as by providing information to fix information asymmetries and inefficiencies. That executive order remains in place today.
Libertarianism, to be different from general pragmatic freemarketism of centrist Dems like Obama and Clinton, makes some further claims about the role of government: (1) a moral argument giving greater weight to individual autonomy than overall social good, such that even government programs that do better than markets for society overall are rejected if they tread on autonomy; (2) a difference of empirical opinion about whether the conditions necessary for truly free and competitive markets obtain in the US and what is necessary to create them (e.g., whether antitrust law is necessary, whether pre-PPACA health insurance markets were competitive); and (3) moral arguments about distributive fairness (i.e., who should benefit from public resources, whether society has obligations to the poor, elderly, etc.).
In short, the differences aren’t about whether well-functioning markets are better than top-down regulation in terms of efficiency and growth. They are about whether and how growth should be redistributed, how to weigh individual autonomy against social welfare, and what a realistic assessment of various markets tells us about whether they are well-functioning.
Last time I checked, Moody’s, S&P ad nausem haven’t suffered much of an integrity blow after certifying the greatest ponzi scheme in the history of mankind (neither did *anyone *go to jail for it either and I’m looking at you Dick Fuld).
How do you explain the great reset from a Libertarian point of view? Glass Stegal repealed, virtually zero oversight, and a destroyed global economy. Only reason that all the Wall Street banks didn’t follow Lehman’s was the US government bailout and backstop (but let me thank the Bank of England for first drawing a line in the sand.).
(apologies if other dopers have already made this point. I replied before reading through the thread)
China lacks decent enforcement of regulations and doesn’t have the resources for effective enforcement in most cases.
The regulators may or may not be corrupt. Look at the derivatives regulators. They weren’t corrupt in the traditional take bags of money under the table way (and hell, maybe they were) but were ignorant and rocking the boat was not a priority.
China is a wild wild west unbridled, dare we say libertarian, economy with vestige State involvement. I don’t see free market forces in the US that would be any different even with better information flow.
Barney Frank and making loans to black people. Duh.
Why don’t you consider why the rating agencies screwed up. Was it because they were stupid? Hardly. Was it because they wanted the economy to crash. Nope. Maybe it was because their customers, the people who paid them money, weren’t the people who would buy the bonds and other instruments but rather the people who issued the instruments. And those people, they thought, and probably correctly, would go to an agency who would give them a good rating if they were too suspicious. Another cause was that they published their criteria, which allowed the banks to create instruments to be as risky as possible and still get AAA ratings.
And sorry, it is impossible for all financial service firms and pension funds to independently rate everything out there. It would drive up their costs and the costs for the banks, which is bad for everyone. The rating agencies were supposed to be an independent certifier of safety. If they had done their job right, the market has the information it needs to run smoothly at a minimum cost.
Does anyone else remember? Back when GeeDub was Preznit, and people would bring up the obvious difficulties in putting a trillion dollar in war debt on The Card? What did they say?
“The housing market is great! Sure, there are some niggling little signs of distress, but the housing market is great, everybody with money is making a ton of money! Why, just last week, a couple bought a house for $11,000 and sold it this week for $300,000! Everybody is making a ton of money, your equity is going through the roof! And that’s OK, because you can refinance and get another roof, with a house on it! Everybody is getting rich, don’t worry about it!”
I member it. It was all great until those damn liberals used voter fraud to make that socialist Kenyan Muslim the new preznit. That’s why we need Libertarians to bring us back to those glory days.