Seriously, this “ratings business” where your public company’s bottom line is dependent upon those who you rate. This will go down as one of the biggest tragic comedies when this massive bear market is all said and done. How can anyone rely on the ratings ever again? I mean, common sense screams that no corporation can have AAA debt as they are not backed by the full faith and credit of the US. Now they are hesitant to cut ratings that they so foolishly had investors rely upon. Truly amazing stuff here, folks. Unfortunately, this is FAR from over: ------ “Even after downgrading almost 10,000 subprime-mortgage bonds, Standard & Poor’s and Moody’s Investors Service haven’t cut the ones that matter most: AAA securities that are the mainstays of bank and insurance company investments. None of the 80 AAA securities in ABX indexes that track subprime bonds meet the criteria S&P had even before it toughened ratings standards in February, according to data compiled by Bloomberg.” http://www.bloomberg.com/apps/news?pid=20601109&sid=areM7a9s02ko&refer=home
So true. when I look around, every issue is AAA, as long as the rating agency gives me enough time…
What’s the alternative? How many people are prepared to do in-house ratings? Also, US Treasuries are actually (IIRC) AAAAA securities, or were at one point.
the point is that the ratings agency methodology is inherently dubious. this is nothing new, but their true colors are showing now more than ever. What’s the alternative? less reliance on moody’s, S&P, and Fitch. Perhaps investors, at least institutional, will require independent in-house ratings? Perhaps this will become a barrier to entry for smaller shops? Who knows, the market will decide that. But for now, the old style of ratings will forever be changed.