The need for differentiating ratings for less-understood assets may be an important lesson learned from the current mortgage crisis, Federal Reserve Bank of Boston president Eric Rosengren said yesterday.

“The uncertainty surrounding ratings has caused a variety of financial markets to become illiquid and caused very significant write-offs at major financial institutions,” he told the South Shore Chamber of Commerce, according to text of the speech released by the Fed. “Considering ways to differentiate ratings on assets like corporate securities from ratings on assets whose rating histories and price-drivers may be quite different, and less well understood, is probably a first important step.”

“The difficulty in pricing assets should make investors consider whether such complexity is necessary, and whether some of these instruments should be more standardized or possibly moved from dealer markets to exchange-traded instruments,” Rosengren said.

“The difficulty in pricing assets should make investors consider whether such complexity is necessary, and whether some of these instruments should be more standardized or possibly moved from dealer markets to exchange-traded instruments,” he said.

Noting that the “challenges” are “unique and complex,” Rosengren said: “There may be a significant cost to delaying needed actions that could restore confidence in the ratings process, the pricing of financial assets, and the impact of declining house prices.”

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