Monday, July 8, 2013

S&P defense

In a startling approach, S&P seems to be making a claim that their ratings are marketing activities and not a credible estimate of credit-worthiness.  I am going to outsource the obvious conclusion from Matthew Yglesias:

If talk of objectivity is just marketing hype, then the ratings are worthless. It's just a form of paid public relations for security issuers and nobody should take the ratings seriously for a minute.

In case you have trouble imaging this defense, Kevin Drum posted a picture showing the actual text.  What passes imagination is that the US government has written these ratings into law in terms of what pension funds can invest in.  If this is just paid marketing, should we not repeal these laws?  And would that not remove what little is left of the business model?

What am I missing here?

No comments:

Post a Comment