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Showing posts from September, 2009

The Greed of Credit-Rating Agenices

There are three major credit rating agencies: Standard & Poor’s, Moody’s Investors Services, and Fitch.  These three agencies assign risk to corporate investment.  They can deliver a top-tier rating of AAA to a corporate investment that they consider an excellent investment.

The shock to Americans who relied upon their credit ratings was that these three agencies assigned “AAA” ratings to investments that were backed by subprime mortgages. Of course, their response is that they were fooled just like you and me, although unlike you and me, they had a stable full of bright well educated MBAs to conduct in-depth analysis of these investments. Of course, if that excuse doesn’t work, they fall back on credit ratings are constitutionally protected free speech and are thus protected from lawsuits.

Fortunately, a federal judge in New York, Shira Scheindlin, stopped such excuses in their tracks and said that indeed companies that provided credit ratings are indeed liable from …