Conflicts of Interest
A variety of conflicts of interest were argued as contributing to this crisis:
- Private credit rating agencies are compensated for rating debt securities by those issuing the securities, who have an interest in seeing the most positive ratings applied. Critics argued for alternative funding mechanisms.
- There is a "revolving door" between major financial institutions, the Treasury Department, and Treasury bailout programs. For example, the former CEO of Goldman Sachs was Henry Paulson, who became President George W. Bush's Treasury Secretary.
- There is a "revolving door" between major financial institutions and the Securities and Exchange Commission (SEC), which is supposed to monitor them.
A precedent is the Sarbanes-Oxley Act of 2002, which implemented a "cooling-off period" between auditors and the firms they audit. The law prohibits auditors from auditing a publicly traded firm if the CEO or top financial management worked for the audit firm during the past year.
Read more about this topic: Subprime Mortgage Crisis Solutions Debate
Famous quotes containing the words conflicts of, conflicts and/or interest:
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—D.W. Winnicott (20th century)
“The extrovert and introvert, the realist and idealist, the scientist and philosopher, the man who found himself by refinding his life history and the individual who discovered his being in fantasy, these are the differences between Freud and Jung.”
—Robert S. Steele. Freud and Jung: Conflicts of Interpretation, ch. 10, Routledge & Kegan Paul (1982)
“Any effort in philosophy to make the obscure obvious is likely to be unappealing, for the penalty of failure is confusion while the reward of success is banality. An answer, once found, is dull; and the only remaining interest lies in a further effort to render equally dull what is still obscure enough to be intriguing.”
—Nelson Goodman (b. 1906)