James Lardner

James Lardner is a journalist and a senior policy analyst at Demos.

Recent Articles

Watching the Watchers

The corruption of credit-rating agencies was at the heart of the financial collapse. So far, Congress has not had the nerve to pursue fundamental reform.

Peter D'Erchia, managing director, U.S. Public Finance for Standard & Poor's, testifies on Capitol Hill in Washington, Friday, April 23, 2010.(AP Photo/Harry Hamburg)
Credit-rating agencies exist to evaluate the safety of debt securities. Imagine for a moment that they had done their job when financial go-getters began churning out bonds backed by sketchy loans and the dream of endlessly rising home prices. Properly labeled as junk, those bonds would have found few buyers. Denied access to the vast reservoirs of capital held in mutual, money-market, and pension funds, the go-getters would have ended up as minor players. And millions of Americans might still have the jobs, homes, retirement savings, and economic security they lost. Now imagine what it would take to get the rating agencies to do their job properly. The problem is one of glaring, undisputed, inescapable conflict of interest. Why did the rating agencies gloss over the huge risks of mortgage-backed bonds and collateralized debt obligations? Because that was the way to attract business from the securities issuers who paid them, picked them, and, in many cases, had their help structuring...