Word: interests
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...Moody’s, like rival firms Standard & Poor’s (S&P) and Fitch, Inc., follows a “corporation-paid” model, in which the corporation issuing a security pays for Moody’s to rate that security. This creates a conflict of interest. Since rating agencies want to keep a steady flow of business, they have good reason to overrate securities and make their customers—the issuers—happy. Indeed, rating agencies in the past have given collaborative feedback to issuers to such an extent, some argue, that their ratings...
...While proposed solutions help fix conflicts of interest, more inevitably arise. A simple alternative would be to return to the “investor-paid” model that rating agencies followed pre-1968, when S&P began charging issuers for ratings, in addition to the subscription fee they had always collected from investors who used the ratings. Yet, as many firms argue—both in 1968 and in recent months, when the model has again been proposed as a viable solution—relying solely on a subscription service does not bring in enough revenue to allow rating...
...Thus, some claim, they should be exempt from rebuke. According to The Wall Street Journal, many credit-rating agencies intend to use the constitutional right to free speech as a defense against upcoming litigation cases. While this may be juridical truth, and a clever defense, conflicts of interest and careless behavior will remain even under the old, investor-paid model. All the regulators can do is continue to effectively cooperate with rating agencies, working to create a better—albeit imperfect—system...
...result is almost assured, why so much interest? Three reasons. First, South Africa is Africa's economic and political heavyweight. What happens in South Africa affects all Africa and is often seen as a weather vane for the continent. In particular, the ANC is the most prominent of Africa's liberation movements - the revolutionary parties that overthrew white or colonial rule. Its success or failure in adapting from the demands of fighting a revolutionary war to the demands of competing in a free and fair democracy - requiring less a transition than a total reinvention - has wide implications for Africa, even...
Finally, the ANC's support has steadily declined since the heady days of the early 1990s. This election is billed as the most open since the end of apartheid - and perhaps the first in which the party's victory is not guaranteed - and that competition has naturally raised interest...