Who Pays the Rating Agencies? | The Business Desk with Paul Solman | PBS NewsHour

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Who Pays the Rating Agencies?

Name: Larry Salomon
City & State: Tilson, N.Y.

AAA; Jeremy Brooks via Flickr

Question: Who pays the rating agencies, like Moody's? What is the source of their income?

Paul Solman: That's been the scandal. They're paid by the issuers of the bonds and stocks they rate. They thus have a huge incentive not to rate too harshly, lest the client go to the "easier" agency. It's the same problem auditors have.

-- Posted April 20, 2009 | Comments ( ) | Permalink