Quote:
Originally Posted by topcat61
My gut feeling is that these grading companies are giving preferential treatment to the auction houses over collectors and dealers because they're the ones giving the most amount of money.
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I can think of one historical parallel.
Credit rating agencies during the run up to the financial crisis:
https://www.cfr.org/backgrounder/cre...ng-controversy
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The "Big Three" global credit rating agencies—U.S.-based Standard and Poor’s (S&P), Moody’s, and Fitch Ratings—have come under intense scrutiny in the wake of the global financial crisis. Meant to provide investors with reliable information on the riskiness of various kinds of debt, these agencies have instead been accused of exacerbating the financial crisis and defrauding investors by offering overly favorable evaluations of insolvent financial institutions and approving extremely risky mortgage-related securities."
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Most criticism of credit raters centers on the "issuer pays" model—employed by each of the Big Three—whereby a bond’s issuer pays the rating agencies for the initial rating of a security, as well as ongoing ratings. The public (and investors) can then access these ratings free of charge. The popularity of this model grew in the 1970s, following years of "subscriber pays" dominance, in which investors paid for the ratings instead. Issuers, who needed certain ratings in order to sell their bonds to regulated financial institutions, may have been more willing to pay for these services than investors were, according to a 2010 OECD report [PDF]."
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Critics argue that the ratings agencies failed to take into account the potential for a decline in housing prices and its effect on loan defaults. The agencies’ inflated ratings also failed to account for the greater systemic risks associated with structured products, and they were accused of sacrificing quality ratings to win a bigger share of the lucrative sector. By 2006, Moody’s had earned more revenue from structured finance—$881 million—than all its 2001 business revenues combined."