20 Aug Greg Gordon: credit ratings still broken, experts say

Greg Gordon of McClatchy’s Washington Bureau writes about the Brookings study by Ann Rutledge and Robert Litan, which calls for a single, public, numerical (ordinal, not cardinal), benchmark credit scale. Gordon quotes a recent interview with Rutledge:

“‘If we don’t have objective measures of credit risk,’ Rutledge said in a phone interview, ‘then the only thing we have is psychology, and psychology works in the wrong way. When things slow down, then credit slows down and there’s not enough money. You can’t borrow.

“‘When you’re exuberant and can see nothing but blue skies, there’s too much lending. That’s why we need objective credit measures. We need yardsticks of performance.'”

Read more here: http://www.sacbee.com/2014/07/09/6545218/credit-ratings-still-broken-experts.html

Rutledge-Litan study for Brookings: http://www.brookings.edu/research/papers/2014/07/real-fix-for-credit-ratings-litan