Wednesday, March 20, 2013
The biggest rating confusion starts with the selection of a college for your kids. There are many college guides that have some specific criteria as to the rankings of the colleges they cover and it adds to the confusion. One can say that the top college is such and such but the other guide can say no their criteria say such and such college is the best one and so on. Most of the kids and their parents have started to depend on these college rankings when applying and the pressure is on for colleges to improve their rankings and you know that what that means, sometimes there will be a slipup and dubious statistics maybe provided to the college ranking companies. The same things happen in case of health care, financial institutions, websites and anything you can think of is getting the ratings treatment. It was this ratings confusion that investors relied on from the credit rating agencies for financial instruments and then got burned. I am not saying that it was due only to the ratings formula that the ratings agencies applied that led to the recession but it was also the overwhelming reliance by the investors ( who should know better regarding doing due diligence on their part) that was also part of the problem. In this ratings game, the more institutions create ratings (supposedly based on their formula) and insist on being in the right, this ratings confusion will keep on going creating even more confusion.