There Is a Simple Solution to the Conflict of Interest of Bond Rating Agencies

Floyd Norris had an interesting piece discussing the conflict of interest problems with company auditors and also the bond rating agencies that rate securities issued by banks. The basic problem is that since both are paid by the companies who hire them, they have a strong incentive to give an positive assessment regardless of the reality of the situation. This was a huge problem in the housing bubble years when the credit rating agencies gave trillions of dollars worth of mortgage backed sec...