White Paper | Credit Ratings Across Asset Classes: A=A? – Credit-rating companies routinely award higher rankings to debt issued by banks and corporations that pay them the most


Contrary to assertions by the Big 3 credit raters, we demonstrate that credit ratings are not comparable across asset classes. Default frequencies, ratings transition matrices, hazard rate models, and ratings adjustment regressions all indicate that differences exist across asset classes both in the levels of credit ratings and the distributions of their changes. Relative to traditional corporate bond ratings, municipal and sovereign bonds have been rated more harshly and structured products have been rated more generously. These findings exist to varying degrees throughout our entire 30-year sample period. Consistent with a conflict of interest in an issuer-pays compensation structure, ratings standards are inversely correlated with revenue generation among the asset classes. Our results are less consistent with the more benign explanation that ratings inflation is a result of issuer opacity. These results contribute to the debate surrounding regulatory reliance on credit ratings and the current SEC proposal to standardize credit ratings across asset class.

Full paper below…




Credit Ratings Across Asset Classes: A=A?

2 Responses to “White Paper | Credit Ratings Across Asset Classes: A=A? – Credit-rating companies routinely award higher rankings to debt issued by banks and corporations that pay them the most”
  1. lvent says:

    This is why all we have heard for the last three years is nothing but lies like..The banks need a bailout of by the U.S. TAXPAYERS because people bought too much stuff they really could not afford…This is a recession…The unemployment numbers are below 10 percent….Obama: I am going to go after Wall Street……Attorney #1 says, This is not fraud…this is what they did….!!! The President of the United States says, This is not criminal but reckless…!! The AG’s office says…..We have owners who own us..You signed that contract!! The banks have said they can “fix” this fraud…You are approved for the Obama Plan….uh…you were denied the loan mod at the last minute by the U.S. TREASURY!!! These institutions are too big too fail….it would be catastrophic to not bailout these financial institutions…..America is Broke…The banks own the place…Walk away from that underwater home….just do a short sale…or a deed in lieu….attorney #2 says..don’t even go to court and fight your fraudclosure……don’t even answer the fraudclosure complaint…you are going to lose with or without an attorney……Attorney #3 says….robosigning? I have never heard of such a thing……there is no such a thing as robosigning…! Half of these foreclosures need to go through…Now you know, we owe China money….! File a complaint with every agency imaginable by email or complaint form or hand written letter………IDFPR….THE OCC…HAMP… SORRY…..we do not see any fraud here…Call and e-mail THE POLITICIANS REQUESTING A MORATORIUM ON FORECLOSURES IN LIGHT OF ALL OF THE FRAUDL… the Governor’s office says…tell the IL.GEN ASSEMBLY..HIS HANDS ARE TIED…. the Senators, NO RESPONSE.. the Congressmen..NO RESPONSE TO MY WRITTEN REQUEST FOR AN INVESTIGATION INTO THE FRAUD… the White House NO RELEVANT RESPONSE… The County Sheriffs dept..WE ARE DOING ALL THAT WE CAN…..There is no inflation…the property tax bills will be lower this time…and on and on and on….lie, on top of lie, on top of lie….!.

  2. indio007 says:

    The evidence continues to pile up. Not that it wasn’t an open and shut case 2 years ago. Now that a quid pro quo has been demonstrated that the ratings agencies are co -conspirators , maybe we will get some real action.

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