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Showing posts with the label Standard and Poors

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…

Credit Agencies grilled on the Hill (Tian Weng)

Members of Congress held the third in a series of hearings on the financial crisis titled “Credit Rating Agencies and the Financial Crisis.” The hearing, held on Wednesday in 2154 Rayburn House Office Building, examined the roles and responsibilities of credit rating agencies in the current financial turmoil. Top credit rating agency executives also testified before the House Committee on Oversight and Government Reform.

In his opening statement, Committee Chairman Henry Waxman briefly outlined the sequence of events which lead to today’s crises. “The story of the credit rating agencies is a story of colossal failure,” Mr. Waxman said. He pointed out that leading credit rating agencies are essential financial gatekeepers. However, the agencies assigned triple-A ratings to securities and CDOs backed by risky subprime mortgage loans. As a result, the entire financial system is now at risk.

The three largest credit rating agencies - Standard & Poor’s, Moody’s, and Fitch Ratings control…