Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

I’d like to ask as a practical matter what weighting we should put in our expectations or even our recommendations on reform of the rating system versus the expectation that investors would actually reduce their reliance on ratings. My impression is that many institutional investors, especially public pension funds, are notoriously understaffed. Then they work for, as you pointed out in your presentation, boards that either represent the beneficiaries or in some respects are quite political in nature and not necessarily financially sophisticated. That would lead me to the conclusion that, as a practical matter, they’re going to be highly reliant on ratings. The ratio of professional employees to the volume of investment is so low that they have to choose their restaurants by stars because they don’t have time to do the tasting themselves or they’re not given the budgets to do that now. So I’m curious about this tension between getting the rating system right versus having the investors reduce their reliance on ratings.

Keyboard shortcuts

j previous speech k next speech