Can Rating Agencies be Trusted?

COMMENT: The manipulations of S&P indicate that these clowns’ output should be printed on absorbent paper. The point is exactly that this company and its directors have changed their rating based on anticipated events, and, given on the exact day as the Tory party’s leaders are being chosen, precisely in order to increase pressure on Britain’s political system whilst it is in the process of sorting itself out. This company has shown itself to be entirely devoid of any professional ethics. The sooner non-US ratings agencies are formed to clean up that industry, the better.

Above the toilet roll holders it should now read: “S&P analysis, please take one”

REPLY: I fully agree. The problem is that the S&P is a FOR-PROFIT private group and I believe they are not trustworthy. They have shown that they compete with other rating agencies and will sell ratings to the highest bidder. It is not that they are US based, it is that they are FOR-PROFIT.

I recently attended a meeting with one of our pension fund clients. They swapped all government debt for private, top-notch corporate debt. They made back $2 billion. The rating agency said they were taking on more risk because they swapped to private from public. Our client did their own due diligence based on our recommendation and confirmed that there was never a default by a major corporation in this category, but government debt has defaulted, rates have been artificially reduced, and holders of debt are often forced to take a haircut. They had no response. They clearly rate according to opinion rather than hard facts. They have become far too political and should have been thrown in prison for what they did with rating CDOs at AAA. I believe they are just not trustworthy