Public Credit Rating Agencies

Susan K. Schroeder is Lecturer at the Department of Political Economy at the University of Sydney, Australia. Her current areas of research are international financial crises, business cycles, and financial fragility and how these areas are linked to the country risk assessment. She has taught at universities in New York, USA; Bremen, Germany; and Auckland, New Zealand. Schroeder has been visiting scholar at SOAS, University of London, UK; the Mises Institute, USA; and Wolfson College, Cambridge University, UK, where she is a lifetime member.

• 1. Introduction 2. Functions And Malfunctions Of The Rating Industry 3. Private Credit Risk 4. Sovereign Credit Risk5. Regulatory Capture6. Public Credit Rating Agency: Functions And Structure7. Conclusion

"The momentum of investment and financing decisions has become increasingly subject to the influence of credit rating agencies. Yet the differing methods they deploy to determine credit worthiness assessments, the variability in their determinations and, above all, the tendencies to overstate risk should prompt serious questions about the influence these agencies have in shaping the dynamics of contemporary capitalism. In this provocative study, Schroeder exposes the potentially damaging consequences of this privileged role. In mounting a powerful case for moderating the influence of credit rating agencies, Schroeder builds upon the heterodox economic tradition to advocate for the establishment of a public agency that would enhance the integrity of credit rating assessments and focus on delivering investment stability." Stuart Rosewarne, Associate Professor of Political Economy, University of Sydney, Australia "Private security rating agencies are paid by firms wanting to sell securities; understandably they rate securities highly. In this thoughtful book, Susan Schroeder proposes public rating agencies as a policy solution. She argues cogently that this would eliminate conflicts of interest, provide investors with more useful information and help stabilize the economy." Steven Pressman, Professor of Economics and Finance, Monmouth University, USA