“Companies that made bad credit calls disappeared, sold themselves in an undignified manner or, at best, exist in a diminished capacity. The rating agencies, incredibly, continue to give opinions.”
This is what Arturo Cifuentes, a Principal with Atacama Partners, said some three years ago. His words now bear more potence when put against the background of the current eurozone debt crisis. In the past 2 years we have watched as members of the animal farm were lined up and, one after the other, they were called to the front and their arses were spanked red- just for kicks. Even as Ireland vehemently protested that they were not Greece, rating agencies begged to differ, and the bond traders backed them to the hilt. Today's action by rating agencies is proof this hazing ritual is not going to stop any time soon. At least not until all Greeks are properly accounted for. Leading the manhunt is none other than Moodys, Fitch and S&P, the same detectives whose most recent report card reads:
10%. Very poor. This article perhaps makes it all clear. And by the way, what happened to the good old free market?
Because ratings agencies create a command economy. Perhaps not the same as that of Stalin's Communist Russia, but a command economy nevertheless. For the avoidance of doubt, a free market is one where people make their own decisions based on their own judgements, not on the recommendation of some all-knowing god. If all ratings agencies did was to collect and publish data on who has defaulted on their debt or who is up-to-date on their payments, that would be fine. But their dubious mandate to make qualitative decisions which are binding to market participants is at odds with a free market.
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