Skip to content
Subscriber Only
Barry Ritholtz

The Bond Raters Still Need to Be Fixed

The reforms adopted after the financial crisis didn’t resolve the industry’s inherent conflicts.

Read and weep.

Read and weep.

Photographer: Joshua Roberts/Bloomberg

Standard & Poor’s , Moody’s and Fitch Ratings, the biggest credit-ratings companies, were major causative factors in the financial crisis. Even free-market acolyte Alan Greenspan admitted as much. Little has changed since then, other than that enough time has passed to allow investors to forget this fact.

I have been following this issue since 2007, so here is a brief history.

With the economy still sluggish after the dot-com crash and 9/11, the Federal Reserve slashed interest rates to 1%. Bond managers were under intense pressure to generate yield. This sent them on a mad scramble to find investment-grade debt with higher returns.