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Showing posts with the label NRSRO

Standard & Poor's cut its credit outlook on the US to negative

On Monday, April 18th, Standard and Poors, a Nationally Recognized Statistical Rating Organization (NRSRO), or credit rating agency, cut its credit outlook for the US to negative. We believe this rating opinion unwarranted and inaccurate. To understand why, one must look at credit rating agencies in general, their competence (specifically, their performance prior to the recent financial crisis), and current AAA rated countries.
Lets take that last item first. Here is the list of countries currently rated AAA by S&P: Australia AustriaCanadaDenmarkFinlandFranceGermanyGuernseyHong KongIsle of ManLiechtensteinNetherlands New ZealandSingaporeSwedenUnited KingdomUnited States of AmericaWe find it difficult to believe that the Isle of Man and Liechtenstein, countries whose main export appears to be laundered money, will be better future credit risks than the United States of America.
Let's next review what a credit rating agency is, what it does and how it makes money. According to one…