my name's david pomeroy. one vulnerability you mentioned was credit agencies were assigning aaa ratings to securities that carried much more risk than perhaps might warrant. it seems like the incentives would be aligned for the buyers to seek out ratings that were more accurate because they would be taking on more risk. was there a systemic problem as far as how ip sentives were aligned within the credit ratings system that allowed these faultyatings to prove mull gate? >> you identified one of thu wo that somehow instead of thecutye one who hires and pays the credit rater, you would think that it would be in the interest of the buyers who after all, are the ones bearing the risk to band together somehow and pay the credit rater to give them the best opinion they can about what the credit quality is of the security. unfortunately, that model doesn't seem to work. there are very few examples if any that i know of where it works. the problem is a free rider problem. basically, if -- if five investors get togeth

my name is david pomeroy, one vulnerability you mentioned was that the credit ratings were assigning aaa ratings to securities that carried much more risk than perhaps a aaa rating might warrant. was -- it seems like the incentives would be aligned for the buyers to seek out ratings that were more accurate because they would be taking on more risk. was there a systemic problem as far as how incentives were aligned with the credit rating system that allowed these faulty ratings to propagate throughout the system. >> you have some incentive problems and you identified with one of them that you would think that instead of the seller of the security being the one who hires and pays the credit rater you think it would be in the interest of the buyers who after all are the ones bearing the risk to band together somehow and pay the credit rater to give them the best opinion they can about what the credit quality is of the security. unfortunately, that model doesn't seem to work. there's very few examples of any where it works and the problem is what economists call a free rider problem. bas