Rating agencies roll i krisen

"The chief executive of Moody's admitted to a Senate panel yesterday that the US credit rating agency failed to anticipate the severe deterioration in the US housing market that led to the financial crisis and was "not satisfied" with its performance.

However, Raymond McDaniel defended the credit agencies' dependence on fees paid by Wall Street firms, claiming "potential conflicts exist regardless of who pays".

Mr McDaniel's version of events was challenged by evidence presented at a hearing before the Senate that detailed how some senior managers at Moody's and Standard & Poor's supressed internal concerns about the quality of the securities they rated due to pressure from the banks that paid their fees."

Stephanie Kirchgaessner & Kevin Sieff, "Moody's chief admits to failings in runup to crisis", FT 24 april

"As the Watergate scandal threatened to engulf Richard Nixon, the US president told his fellow countrymen they deserved to know whether he was a crook.

Nixon said he wasn't, but it didn't prevent his downfall.

Now it is the turn of the rating agencies - some of the most powerful players in the world's financial system - to have, in their own words, a Nixon moment."

Sam Jones & Stephanie Kirchgaessner, "Rating agencies' Nixon moment", FT 24 april

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UPPDATERING
16 maj, "Makten i världsekonomin - var finns den?"

Jennifer Thompson,"Rating Europe's sovereigns, the polite way", FT blog Alphaville 5 november 2010

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Uppdatering 30 mars 2011
Greklands finansminister George Papaconstantinou har gått ut och i skrift kritiserat Moody's för beslutet att nedgradera Greklands till investeringsgraden B1. Papaconstantinou skriver bland annat:
"Ultimately, Moody's downgrading of Greece's debt reveals more about the misaligned incentives and the lack of accountability of credit rating agencies than the genuine state or prospects of the Greek economy. Having completely missed the build-up of risk that led to the global financial crisis in 2008, the rating agencies are now competing with each other to be the first to identify risks that will lead to the next crisis."

Milne och Oakley om kritiken av rating agencies:

"Part of the criticism in the crisis was that as rating agencies are paid by issuers, that set-up led to big conflicts of interest that kept ratings artificially high. But most governments pay for their own ratings as well, limiting that line of attack (some such as Germany do not, but agencies still rate them as they are so important to financial markets). /.../

T he big difference in this debate over credit ratings compared with previous ones is that governments are issuing not just criticisms but regulations too. European rules came into force last year that force rating agencies to register with authorities and be more transparent about how they calculate ratings. The US also moved to regulate agencies after the financial crisis.

But Europe in recent months has suggested it could go much further. Proposals have included a new European rating agency, civil liability for ratings and efforts to boost competition in a sector dominated by Moody’s and S&P with Fitch in third place. 'Anything that improves their transparency, that leads to more competition for the agencies, I’m all in favour of,' says Mr Papaconstantinou."

Milne och Oakley beskriver att credit rating agencies gradering av statsskulder baseras på 3 faktorer:

1. skuldens storlek som procent av BNP
2. budgetunderskottet
3. "debt affordability" ("interest costs as a percentage of revenue")

Richard Milne & David Oakley, "Hard to credit", FT 28 mars 2011

Uppdatering 19 augusti

"It is unacceptable that privately owned, for-profit companies should have special, legally sanctioned status at the heart of the financial system to function as quasi-regulatory authorities whose opinions can determine what securities financial institutions can hold, how much capital they need, what the borrowing costs of every member of the system will be, all based on secret deliberations with no accountability."

Bill Miller, "chief investment officer" på Legg Mason Capital Management, "S&P's downgrade of US debt is wrong and dangerous", FT 9 augusti 2011

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Uppdatering 7 november 2011
Bloomberg Business Week:

"Credit-rating companies routinely award higher rankings to debt issued by banks and corporations that pay them the most, a conflict of interest that may escape Congressional efforts to change the way they do business. Bonds from countries and cities that pay about half as much as issuers of less creditworthy debt are “rated more harshly,” according to a study by scholars at Indiana University in Bloomington, Washington, D.C.-based American University and Rice University in Houston. /.../"

"Credit Rating Companies Favoring Borrowers Paying Most", 31 oktober