Some Claim That Ratings Agencies Have a Conflict of Interest

question 96

Multiple Choice

Some claim that ratings agencies have a conflict of interest since

• A) they rate the quality of their own bonds.
• B) agencies charge firms for their services rather than investors, they have an incentive to give high ratings to gain business.
• C) government began to include bond ratings as part of regulations of mutual funds, banks, and financial firms.
• D) they issued many of the mortgages that were later securitized into bonds.

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Definitions:

Major Point

An important or central idea, argument, or statement in a discussion or piece of writing.

Normal Accidents

A theory that suggests complex systems are prone to inevitable incidents due to their intricate and tightly coupled nature.

Cyber Attacks

Malicious attempts illicitly to breach the information system of an individual or organization, causing harm or stealing data.

Industrial Disasters

Major accidents or catastrophes that occur in industrial settings, often resulting in significant damage and loss of life.