This is the Cato Daily Podcast for Tuesday, January 19th, 2016.

I'm Caleb Brown.

Presidential candidate Bernie Sanders says he would like to take the profit out of credit ratings.

His means would be turning the big

rating houses into non-profits. Would that help in industry that is performed so

poorly over the past decade? Mark Calabria, Director of financial regulation studies at the Cato Institute, offers

his thoughts.

What do credit rating agencies?

What are they supposed to do?

So the credit rating agencies essentially rate the likelihood or default of various times of debt.

Of course we're talking about the corporate.

There are of course consumer credit rate in agencies that do similar things at the consumer level.

But essentially what the standard impores and the Moody's and the Fitch and the many others do is

assign a letter grade based on the probability of default of a particular instrument, and of course the better the letter

grade, the top being something generally along the lines of a AAA means that this is the best

credit.

And of course, once you get down to sub-investment grade and junk grade, those means that there

are a higher levels of default.

Now lots of people have been very critical of credit rating agencies and rightly so, they performed very badly in the run up to the

housing crisis they didn't see it coming just like essentially the rest of the

market didn't exactly see it coming.

Bernie Sanders is among those people who's very critical of credit rating agencies.

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