Credit Spread

Finance allah shmoop what is the credit rating agency reform

act of two thousand six otherwise known as crack are

out out something like that All right yeah that's How

the real pros said anyway this act was meant to

improve the quality of company credit ratings like a blindfold

and dartboard should not be involved in making up are

you know coming up with corporate credit ratings Well the

law was ironically enacted in the hope that we would

avoid nightmares like the subprime mortgage crisis that almost brought

down the finances of while the entire country in world

And yes it worked in the same way that a

scale works in an embarrassing episode of the biggest loser

The idea was that the big three agencies moody's s

and p and fitch were colluding with each other and

raiding every security as a okay sort of the same

way wall street cell site analysts were leaned upon in

the nineties by bankers who paid them to rate every

company of strong by so that the companies would favor

the investment banks when doing lucrative secondary offerings and other

personal wealth management services for the founders and senior executives

Newly ridge from you know aipo booty The big three

then produced a product that wasn't reflective of the real

risks inherent in the marketplace Basically they had been labeling

pink slime and hot dog meat as great a sirloin

Yeah well the act made it much easier for smaller

firms to compete for business by doing high quality research

and not being afraid to give bad ratings tow bad

money butchers will The credit rating agency reform act of

o sixth gives both businesses and the government the tools

they need to fight off the shady hucksters of the

world And make sure the pink slime never you know 00:01:55.443 --> [endTime] such a cz your plate financially