1. Elizabeth Warren Wants the SEC to Crack Down on Moody's

    Elizabeth Warren Wants the SEC to Crack Down on Moody's

    Democratic presidential candidate Elizabeth Warren wants the SEC to crack down on credit rating agencies Moody's and Standard & Poor's for what she calls "troubling reports of inflated bond ratings and the perverse incentives within the bond rating industry." Warren, the Massachusetts senator and a frontrunner for the 2020 Democratic nomination, has been a frequent critic of corporate malfeasance...

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    1. Under the issuer-pays model, bond issuers - like large financial institutions - pay the agencies for their assessments of the products they hope to sell, ultimately giving the rating firms an incentive to give better ratings, regardless of the risk, since bond issuers might otherwise go to their competitors.
    2. It is difficult to understand why the SEC has not yet taken meaningful action to curb the activities of bond rating agencies, given their large contributions to the financial crisis that cost the U.S. economy trillions of dollars and millions of Americans their homes, jobs, and savings.
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