Credit Rating Agencies – No Change at the Top
December 15, 2009
We keep being told how the authorities are learning the lessons of the past. How excessive debt will be brought under control. How there will be a new financial world order.
But when you look at it what has changed? Yes, the UK government has continued its ‘bash a banker’ approach, recently with its one off tax which works very well politically as it ‘covers’ the general election period. Mervyn King talks about splitting up banks, so they are not too big to fail. Prime Ministers and Presidents across the world insist on a global approach. Yet this does feel like words without actions.
It does seem that we are reverting to relying on the same institutions of the past. The one area I find the most surprising is credit rating agencies. The likes of Standard & Poor’s, Moody’s and Fitch are holding the key to nations’ credit ratings, from the UK’s AAA to the recent downgrade of Greece. Are these not the companies who were rating all the various funds that were holding sub prime loans and the Ponzi schemes, etc?
It feels like it is convenient for the institutions that work with these agencies to support them and restore the pre-credit crunch structures. However, one change is that the rating agencies’ focus seems to have changed to the rating of national governments rather than private funds; a mirror to the shift in the media’s attention to debt in the public sector rather than the private sector.
Have they changed their approach in how they evaluate what rating to apply? Should the rating agencies be public bodies? Why should we have confidence in them in this supposed new era…?
Who has spotted the changes in the new financial world order?