Financial Economists Roundtable Statement on Reforming the Role of the Rating "Agencies" in the Securitization Process

Abstract

Assets securitized by private companies reached a peak of nearly $12 trillion in 2008, an amount nearly equal to the entire stock of credit intermediated in traditional ways by the world's banking systems. Failures of care and diligence in the origination, rating, and securitization of subprime mortgages led to a collapse in the prices of securitized assets and the public's confidence in the reliability and integrity of the process by which securities are rated. This decline in confidence has in turn undermined prices and credit flows in every market where investors and regulators rely on the credit ratings provided by Statistical Ratings Organizations (SROs) to certify the quality of debt. Copyright Copyright (c) 2009 Morgan Stanley.