Are credit rating firms a cancer on the financial system?

[ColbertWatcher]

Poll question: Are credit rating firms a cancer on the financial system?

Today the LA Times has a little story arguing that they are (LA Times)

Do you agree?

[xchrom]

1. yes. nt

[Mike 03]

2. Yes, IMO. They fail because they have embeded conflict of interest issues.

They are PAID to provide particular ratings; therefore, they provide good ratings in spite of factors that would tend to lower the ratings.

[ColbertWatcher]

14. This is a good point. n/t

[Occam Bandage]

3. They're an example of why the financial industry must be tightly regulated.

"Cancer" is a bit of hyperbole, I think.

[ColbertWatcher]

4. Re: the hyperbole, I agree.

But, it is the dissolving newspaper industry after all.

[Occam Bandage]

6. Wow, I've replied to three of your polls this evening.

You obviously are posting questions I find especially engaging.

[Mike 03]

7. He's on a roll, I agree. NT

[ColbertWatcher]

12. Thank you, today is this dog's day! n/t

[HowHasItComeToThis]

5. BINGO CITIZEN

[anigbrowl]

8. I think the entire credit (incl ratings) market needs a top-to-bottom overhaul

from financial to consumer credit, ratings firms are slipshod, untransparent, and wield far too much influence.

[customerserviceguy]

9. Voted yes, BUT

when financial firms use consumer credit ratings, they get burned if they take on too many people with low scores. With investment rating firms, they should take a bath when the ratings are wrong, but bank bailouts remove that problem.

We've just rewarded these firms for being royal fuckups.

[ColbertWatcher]

15. Blech, sounds like the "insurance" industry. n/t

[Toucano]

10. You mean the cancer that is the financial system has a cancer itself?

Never thought it was possible, but live and learn.

[InkAddict]

11. The cancer of the financial system is a metastasis...

We're still looking for the unknown primary.

[salin]

13. In the eras (long past) where due diligence were

a key part of banks depending on due dilligence to make loans - than credit agencies had a valuable role. But now that extremely irrelevant factors have entered into the credit rating process (e.g., lowering credit ratings based one WHERE one purchases products even if the bills are immediately paid, if other shoppers at the store are not high credit worthy, suddenly credit scores drop.) Add the delinking of individual records of paying off bills to credit ratings to the very irrational lending practices of recent years (lending far more than the lendee could pay per their pay check) and the whole thing is a farce.

Just today a colleague was teased (but resisted) a car deal that would have increased the monthly payment by 200 a month - this person has no new income, a lot of debt - but the car salesmen (and Chrysler related finance folks) were trying to entice a deal that was unstainable. This same person had credit limits severly cut within the past month on the credit cards. My colleague walked away from the "deals" that would have created even greater debt. So what role are the credit agencies playing - cut credit limits on one end, be ignored to try to induce far higher monthly payments on debt? Clearly the role of credit rating agencies has become arbitrary - to fit the need of the organization offering or declining debt.

[ColbertWatcher]

16. So, it is like medical insurance! n/t

[No.23]

17. Never mind the firms, the ratings themselves are a form of a...

leash.

Or the next best thing, for a ruling class, to a...