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December 12, 2009

Skin in the Game

This essay is in reply to a Motley Fool article where Bob Pozen, chairman of MFS Investment Management, suggests three steps to re-ignite securitization:
  1. Make sure everyone has skin in the game.
  2. Continue using off-balance-sheet entities for the purpose of securitization, but instill safeguards and transparency, and
  3. Reform credit-rating agencies
While I agree with the first two ideas, more regulations are not the solution to making rating agencies more honest. They need to have skin in the game, like all the other players. Here is how I would do it.
This is a really simple solution to the conflict of interest that rating agencies have.

Denny Schlesinger

How Can We Revive the Securitization Market?

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Last updated March 8, 2009.