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Sure, but they wouldn't hold any mandates under Basel II or the like - and the government could link the requirements for pension funds and the like  to the official rating agencies.
by Colman (colman at eurotrib.com) on Mon Apr 26th, 2010 at 12:59:43 PM EST
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But there's the rub.  Why would the market respond favorably to rules set up by the government?  After a few years, those rules will be said to be too "old school" and inappropriate for new developments in the industry, and too politically cumbersome to update as well, leading to a new private industry doing the same thing rating agencies do now -- qualitative, privately compensated advice to very wealthy investors.  And people will believe the ones paid by the billionaires with real skin in the game before the government bureaucrats, like they do now in every filed regulated by government ratings and analysis.
by santiago on Mon Apr 26th, 2010 at 01:07:01 PM EST
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Anonymize and wikify the ratings.

And make all financial transactions public with standard non-vague on-book accounting definitions, so that anyone with a mind to can check a rating for themselves.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Apr 26th, 2010 at 02:41:25 PM EST
[ Parent ]
Good idea.
by santiago on Mon Apr 26th, 2010 at 04:19:45 PM EST
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Why would the market respond favorably to rules set up by the government?

That's not the point. The point is the market only exists within the rules set up by government.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Mon Apr 26th, 2010 at 02:56:00 PM EST
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Yes, but the government only exists within the rules set up by other social forces, one of which today is a shared, deep core belief that markets are both the default and preferred way of organizing things.
by santiago on Mon Apr 26th, 2010 at 04:19:11 PM EST
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And people will believe the ones paid by the billionaires with real skin in the game before the government bureaucrats, like they do now in every filed regulated by government ratings and analysis.

"People" and "wealthy investors" can believe whatever they want. The point here is to prevent the banks from counterfeiting, not to prevent market-worshippers from being separated from their money.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Apr 26th, 2010 at 05:15:36 PM EST
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Agreed, but my point is that people willing to risk their money -- including governments in many cases -- will just ignore the cumbersome US government paid rating agencies anyway and go with the private ones, like they do now.
by santiago on Tue Apr 27th, 2010 at 03:39:47 PM EST
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