Default
Slippery Slopes And Boiling Frogs
Thumb sailer
February 27, 2009, 03:47 PM
A+
|
a-
Print Friendly and PDF
Casey Martin, who was born with a terrible birth defect that crippled one of his legs, leaving him in recurrent pain, starred on Stanford`s famous 1995 college golf team along with the full-blooded Navajo Notah Begay, who went on to win four times on the PGA tour before alcohol brought him down, and with Eldrick Woods Jr., who, last time I heard, remains employed in a golfing capacity.

Despite his disability, Martin enjoyed enough success on the minor league Nike tour to qualify for the PGA tour in 2000. His lawsuit under the Americans with Disability Act to be allowed to use a golf cart on the PGA tour went all the way to the Supreme Court, where he won in 2001.

Martin`s was not a popular victory with players, with both Jack Nicklaus and Arnold Palmer protesting that it would open the door to other players getting a note from their doctor to be chauffeured about the course.

It was easy to imagine a player with a bad back like Fred Couples trying to get permission for a cart, and then the whole thing descending into carts everywhere.

And yet, eight years later, the PGA Tour hasn`t slid down the slippery slope. So far, as far as I can tell, a cart has only been used once by somebody other than the severely unlucky Martin: Erik Compton rode in one tournament last fall because he had gotten his second heart transplant only a few months before.

Essentially, golf has a fairly healthy culture of sportsmanship where top players don`t want to be seen as abusing loopholes. So, it hasn`t been hard so far to restrict cart-riding to rare human-interest stories like Martin and Compton.

In the early 1970s, the Wall Street credit-rating companies (S&P, Moody`s, Fitch) switched over from charging bond-buyers for rating to charging bond-issuers. In the mid-1970s, the government started writing regulations requiring certain levels of ratings from the big three ratings firms: in effective, establishing a legal cartel.

Anybody with a suspicious mind can guess what happened next: right down the slippery slope. The ratings firms succumbed to this conflict of interest and exploited their protected position to get rich by rating crud as gold.

Except, that didn`t happen right away. The slope wasn`t all that slippery. Apparently, the culture was sound enough that it took a couple of decades for the ratings firms to fall prey to the incentives.

Unfortunately, by then, everybody had forgotten that the credit ratings firms have a huge conflict off interest. They`d had that obvious conflict of interest for so long that people had stopped worrying about it. When I Google for it, I can`t find an article talking about their "conflict of interest" before May 2007. A 2006 reference book entitled the Euromoney Encyclopedia of Debt Finance blandly asserts:

Although there would appear to be a conflict of interest as a result of providing a supposedly independent rating in exchange for a fee, this risk is fully mitigated by the market discipline imposed by the need for investor acceptance of the ratings.
Or, perhaps more accurately, the conflict of interest won`t be a problem until it starts being a problem.