Publication

After the eruption of the financial crisis, there was a general consensus that financial markets and rating agencies had singularly failed in giving the right incentives to investors and borrowers. Prior to the crisis, financial markets created a belief that asset prices would grow indefinitely and that risks were low. This systematic underestimation of risks led to excessive private debt accumulation and ultimately to a crash. After such dismal failures one would have expected that no one would take the judgment of financial markets and rating agencies seriously anymore. Yet the opposite has happened. Financial markets and rating agencies are back with a vengeance.