Dodge says lessons to be learned from credit crunch
Last Updated: Wednesday, September 12, 2007 | 9:48 AM ET
CBC News
Bank of Canada governor David Dodge is hoping financial market players have learned some lessons from the current credit crunch, including the need for investors to do their homework.
In a speech Wednesday to a business audience in London, England, Dodge said the current problems will take longer than in the past to work themselves out because of the complexity of the investment products involved.
"Vendors of financial instruments need to structure these investments in such a way that market players can clearly see what they are buying," he said.
"Credit-rating agencies need to clearly indicate that their ratings for highly structured products should not be used with the same degree of certainty as their ratings for conventional, single-name issuers."
Investors, he added, must also be more responsible for doing their research "so that they can better understand the nature of their investments and demand greater transparency where it is now lacking."
"Investors should not rely simply on the pronouncements of rating agencies to deliver their seal of approval," he said.
Problems in the credit market came to a head in August as U.S. subprime mortgage delinquencies rose and it became tougher for companies to secure new debt financing. The mortgage and credit problems have prompted speculation among economists that the U.S. economy is headed for a slowdown and even a possible recession.
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