Why Credit Rating Agencies Go Easy
December 02, 2011
The Dodd-Frank law requires that credit rating agencies--Moody's, Standard & Poor's, Fitch, etc.--report to the Securities and Exchange Commission whenever an analyst takes a job from a company that he or she helped rate. The revolving door between rating agencies and rated companies has been cited as one reason why the rating agencies were so reluctant to downgrade banks overly dependent on shaky subprime mortgages and exotic derivatives before the house of cards came down in 2008. But until now it was hard to know exactly how many people passed through that revolving door. Now we know.