The comment reflects a widely shared misconception about the true objective of “risk-based pricing”. The system actually requires creating the misinformation that allows for making borrowers who should get lower rates agree to pay the higher rates that cover the losses of those that should not have been given credit… at least at the higher rates.

John, Paul and Peter, because of FICO have to pay high interest. John, though he might have been able to do so at lower rates, is not able to service the debt and loses. Paul, utterly responsible, services it, barely, and Peter who is in this group because no ones no why meets the payments with ease. Question: Any winners?

John should for a starter not have been given the credit, at least not at the high rate, and both Paul and Peter, having been able to service the debt at high rates evidenced de facto they merited lower rates. Answer: No winners! Except of course those who are not to be named!

How libertarians can shut up about the financial information cartels that chain the markets to neo-non-transparent-regulations, I have never understood.

How progressives can shut up about the discrimination implicit in the system and that surely introduces more inequality in the societies than what they love to attribute to globalization, I have never understood.

But it can indeed be arbitrarily decided by FICO and given that they are many more banks than one FICO, the arbitrary decision of the banks mights be preferable than the one single decision of a FICO.

What amazes me is that among so many intelligent people discussing the deregulated financial markets there is so little discussion on how information cartels like the credit rating agencies have de-facto encroached on such liberty.

I will now commence rioting.

Posted by: Methinks | Aug 15, 2008 2:08:18 PM

No thanks, we had enough of that with those WTO freaks in 1999.