We all think that Standard and Poor, and Moody's are a bunch of incompetent, corrupt and politically motivated gangsters, destroying value in the wake of every announcement.
Aditya Chakrabortty at the Guardian ofers his take on the record of dis-credit rating agencies:
Why should S&P and Moody's earn such vast sums? Certainly not for their oracular genius – the agencies have as much foresight as Mr Magoo. In my working life, the credit-rating duopoly has failed to warn investors about the Asian financial crisis, Enron, the subprime crisis, Lehman Brothers – and Greece. My particular favourite, Moody's report dates from December 2009 and is titled "Investor fears over Greek government liquidity misplaced". Six months later, Athens received a $147bn rescue package.
Nor are they much cop at analysing corporates, either. Consider this statistic from Sukhdev Johal at Royal Holloway University of London: of the corporate debt rated by S&P as AAA, 32% has been downgraded within just three years, 57% within seven years. That is a huge discrepancy and one that you and I end up paying for through losses on our pension funds.
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Since they can't rest on their records, the dis-credit agencies prefer to drape themselves in the cloak of science, claiming the work they do is highly technical and independent. But the anthropologist Alexandra Ouroussoff has spent years studying the agencies; she remembers how in the middle of last January's turmoil in Tunisia, S&P issued a report warning of "downward ratings pressures" on neighbouring governments if they tried to calm social unrest with "populist" tax cuts or spending increases. That extraordinary intervention in the middle of a revolution amounted to one dictum: screw your people and screw political stability; to remain financially viable, you have to stick to your spending plans.
They are paid to give opinions that the people paying for the opinions like and want to hear. That's not very honest. Sweep them away into the dustbin of history.
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