Credit Rating Agencies Were Subject to Conflicts of Interest in the Subprime

question 87

Multiple Choice

Credit rating agencies were subject to conflicts of interest in the subprime mortgage market because ________.

• A) banks were earning large fees by underwriting the mortgage-backed securities
• B) they had little incentives to make sure that the mortgage was a good credit risk
• C) they had weak incentives to make sure that the holders of the securities would be paid back
• D) they were earning fees from rating the mortgage-backed securities and from advising clients on how to structure the securities to get the highest ratings

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Definitions:

Integrity

This refers to the quality of being honest and having strong moral principles; moral uprightness.

Credentials

Pertains to the qualifications, achievements, personal qualities, or aspects of a person's background, typically used to indicate they are suitable for something.

Misrepresentation

The act of giving a false or misleading account of the nature of something, often leading to misunderstandings or breaches of trust.

Client's Autonomy

The right and capacity of clients to make their own decisions, respected and upheld within therapeutic and supportive relationships.