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…

No bio, some books worth reading – The Rational Optimist: How Prosperity Evolves – Matt Ridley .

Crisis Economics: A Crash Course in the Future of Finance -Nouriel Roubini, Stephen Mihm