moral hazard and rating agencies
Floyd Norris wrote an interesting piece on the inherent incentives for rating agencies to rate securities highly for the Economix blog of the New York Times.
http://economix.blogs.nytimes.com/2013/08/01/pick-your-own-judge/?_r=0
Although Norris is deffinitely correct in his assessment of the misaligned incentives the rating agaencies and bansk dealing with these securites operate under, however, his parting statement about the need for investors to do a more vigorous check of the securities they intend to purchase instead of relying solely on the rating agencies is not enough. of course it's always important for investors of anything to be informed about the people they choose to take advice from, it's is not only that investors are not properly vetting their own investments, but rather that the banks and rating agencies are able to get away with misrepresenting these securities.
If, as Norris points out, the current regulations are less a hinderance to this kind of misrepresentaion, then a different type of regulation is needed, more than simply passing the blame from the rating aganeciea and banks onto the investors.