Time To Take Down the Rating's Agencies

Standard and Poor's Discredited
by Max

These guys were giving AAA ratings to junk mortgage products, and now they have downgraded the US credit rating. When is the US government going to go to war against these credit rating agencies? Along with the de-regulation of Wall Street, they brought down the world economy in 2008. I have a friend in the financial service sector who says that the Banks now employ their own ratings professionals because the three rating agencies failed so miserably. Most large financial institutions don't trust these rating's agencies at this point. Fool me once... Then the data that they presented to the Treasury Department had a two trillion dollar error. This all just seems reckless. Don't you think that if you were going to issue the most important press release in the history of the company they would have checked all the numbers?

So what can be done? This coupled with the polling data released showing huge dissatisfaction with Congress hopefully will light a fire under the members from both parties. It would be difficult for the United States to retaliate against S&P or the others at this time, but they could urge International Monetary Fund to strictly oversee the three credit rating agencies. They could ask for a certification process for the three rating agencies, since the economy starts and stops based on their ratings. They could begin to open their books and their management to public scrutiny. They could bring some sunshine into the rating agencies. But the reality is where are countries and large investment companies going to park their money? Europe is struggling; Japan is trying to recover from natural disasters; China is an emerging economy; The Middle East is exploding; and Russia is not a stable economy. Will everyone be looking down under for investment safe havens?

S & P missed the housing bubble. They did not realize that the bundling of predatory and bogus mortgages would eventually pop the housing bubble and bring down the economy. I would encourage listening to the Alex Blumberg piece from This American Life in 2009 to get a good overview of the credit rating agencies involvement in the US downturn. Regulate these credit rating companies until they find religion.