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Credit ratings agencies: the lessons of a children’s fable

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Some interesting pieces in the media today on credit ratings agencies, which appear, at least on the face of it, to have been produced pretty much without recognition of each other’s existence: on Peston’s Picks; at Citywire; and by John Gapper at the FT.

The consensus between the pieces appears to be largely that the agencies remain influential, not least in the context of their role in the current financial crises enveloping Greece and Spain, in spite of an inability on past form to recognise – in the gutter language of the day – a turd when they see one and to call as such. Shockingly, it also seems that the agencies were either uninformed (or else misinformed) of the full depth of the products they were rating, or else they simply did not understand them and did not care sufficiently to find out. Either way, I’d have thought that an ability to stand up and say, along with the child in Hans Christian Andersen’s fable, that ‘the Emperor has no clothes on‘ would have been a prime raison d’être for such an organisation – or better said, perhaps, that such an ability ought to be their most highly valued asset in the future. Economies deserve better.

The agencies’ collective ability to resemble the three  ‘hear no evil, see no evil and speak no evil’ – except at the bidding of their masters in the financial investment and speculatory world, of course – renders them ripe for reform by any government intent on tackling the financial abuses which have led to the current scandals and returning national economies to be run in the interests of the people.


Written by Calvin

29/04/2010 at 5:52 pm

Posted in Economic trends

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