US Ratings Agencies : Um.. please don’t use our ratings

So, just as Ireland get’s downgraded by Moody’s, the Financial Reform Bill in the USA throws a spanner in the works, potentially making the agencies liable for inaccurate ratings. Their response – ‘stop using them please’. From the Wall Street Journal (via Naked Capitalism)

The nation’s three dominant credit-ratings providers have made an urgent new request of their clients: Please don’t use our credit ratings.

The odd plea is emerging as the first consequence of the financial overhaul that is to be signed into law by President Obama on Wednesday. And it already is creating havoc in the bond markets, parts of which are shutting down in response to the request.

Standard & Poor’s, Moody’s Investors Service and Fitch Ratings are all refusing to allow their ratings to be used in documentation for new bond sales, each said in statements in recent days.

Given that the organisation being rated pays the rating agencies for the rating, how reliable can we regard the ratings anyway?

A week or so a go a Chinese ratings agency gave it’s verdict on western debt – downgrading the USA to AA (along with Britain, Germany and France). The US is still rated AAA by the big 3. With some American commentators suggesting the USA would have to collapse before suffering a downgrade. Presumaby they (the Dagong Global Credit Rating) aren’t on the payroll of Western Governments…

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  • Drumlin Rock

    and a Chinese ratings agency is completely free of Chinese government influence…. ROFLMAO

  • Ryan

    I would certainly take Moody’s ratings with a grain of salt these days on any of their ratings. One must remember that prior to the burst of the housing bubble in the US they were giving securities backed by the lowest tranches of mortgages – those at such a high risk of defaulting they were termed “toxic assets” – AAA ratings and calling them money-good.

  • Gerard

    What purpose does it serve to rate US debt. If uncle sam can’t pay up then we’re all done for.

  • Mack

    And the biggest purchaser of Western (particularly US) government debt is … ?

  • “And the biggest purchaser of Western (particularly US) government debt is … ?” …. Mack says: 21 July 2010 at 3:38 pm

    Apparently it is the Federal Reserve……. which of course is a scam/Ponzi which is leading to a disaster for Uncle Sam.

  • Mack

    touche

  • Mack,

    Egg and face springs to mind, this story enrages me, millions of people in the UK are to have their living standards trashed because the blue and yellow tory government used these agencies to justified their massive attacks on those receiving welfare benefits. Now either they are lying scumbags and the reason they gave as to why they must cut back welfare to the bone is absolute nonsense, or they are amongst the stupidest people in the UK, on a par with Blair when he claimed saddam had DMD’s,

    What is it to be Mack?

  • aquifer

    Short on credit, credibility.

    Democratic governments hate giving voters bad news so we have to make it up.

    The Chinese and Indian economies are overtaking ours, we cannot compete for energy and minerals, and do not choose to take basic manufacturing seriously so people are unermployed. Our governments allow private firms to exaggerate the worth of financial investments and print money to keep taxes coming in. Our local government is paid for by other peoples’ taxes.

    How long can our luck last?