In Berlin to try to secure Germany’s assent for a Greece bailout deal, IMF boss Dominique Strauss-Kahn said earlier today that we “shouldn’t believe too much in what rating agencies say.”
One has to agree – on a number of levels. Over the past decade, Moody’s, Standard & Poor’s and Fitch have proved time and again they can be fallible – and late – in identifying all manner of credit vulnerabilities.
Moreover, during the Greek crisis, the rating agencies have become prime actors rather than arbiters – issuing downgrades and decisions that principally shape markets’ direction (in a fairly brutal way) rather than enlighten and inform.
DSK may in fact hold rating agency industry in contempt. But today what he’s really trying to do is calm markets. The rating agency downgrades – of Greece, Portugal and Spain – over the past two days have pushed the euro down significantly and spurred stock market selloffs around the world.
April 28, 2010
“Fallible” is an understatement. If Greece issued marble-backed bonds, I’d buy them.