Undermining the Credit Rating Agencies For the Public Good

By Mike Colpitts

They blew it! Standard and Poor’s, Fitch and Moody’s all blew the calls on the financial crisis and real estate crash. credit agencies So what does it really matter now that S&P downgraded the U.S. economy for the public good?

It’s their history MAN! S&P has been around for more than 150 years, and over the decades has established itself as the 800 pound Gorilla. It’s hard to undermine the rating agencies, who work to stand-out away and apart from the political rigors and chaos of Washington, D.C.

If there’s a place where investors have gone over the years for good, seeking dependable ratings on stocks, bonds and other securities it’s been S&P. Why, you ask? If for nothing else, simply because investors want to hang their hat somewhere to feel some amount of comfort before they put their money on the table, and in case the roof falls in they have someone to blame.

History has shown that S&P has been pretty darn good over the years. As best can be told, there were only about 15 to 20 people on all of Wall Street that fully understood the depth and magnitude developing for the economy prior to the financial crisis rearing its ugly head.

S&P is world renown with offices in 23 countries. “Today Standard & Poor’s strives to provide investors who want to make better informed investment decisions with market intelligence in the form of credit ratings, indices, investment research and risk evaluations and solutions,” the company’s website reads.

We bet S&P is working harder to provide news and revised credit ratings, especially in light of the tough times they have experienced.

wall street

Not every company gets called on the carpet by Congress. As we move into a new era of economic times, whatever their hardships, changes must and will develop. One of the most important changes that needs to develop is pure transparency, which the public wants and demands for the public good.

On the surface rating agencies have a serious problem. They receive their income for the services they offer directly from the very same firms whose securities they are rating. That alone is a major conflict-of-interest that rating agencies should, and must break if they are going to regain the respect that they so dearly need to survive.

As we move into this tumultuous new era, greater changes will develop. One of the most important changes that needs to develop is transparency, which the public demands in these post banking fraud days.

Business models change and obtaining fees for services from another source is critical for the credit agencies to survive for the public good.