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Standard and Poor

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Standard and Poor

Old 29th Apr 2010, 07:18
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Standard and Poor

After Standard & Pours made a total mess of ratings, which led in part to the world banking crisis, why are their reports still holding so much sway on the world markets?

After that, never mind "junk" status, their reports should have been down graded to "garbage", as all their credabilty to rate any business, organisation or country should have gone down the toilet and S & P with them.

However, the markets for some reason seem to still be listening to these discredited analysts/gypsy fortune tellers, who have now embarked on destabalising the economies of several countries in the Eurozone.

Just how have this Company regained or, it would seem, have never lost their status?
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Old 29th Apr 2010, 07:24
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After Standard & Pours made a total mess of ratings, which led in part to the world banking crisis
am a tad confused by this statement. Why?


Gentleman Jim
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Old 29th Apr 2010, 08:50
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iberia 4138, I totally agree with you !!...
those rating agencies are only worth to wash them all down in the toilet....it's nothing sientific...they are criminals for the world economy....but unfortunately all politicians and governmental decission makers trust them, but because of their own stupidness and incompetence......enough examples in the past....
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Old 29th Apr 2010, 08:56
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GJ

They put high ratings on securities that were essentially worthless (repackaged loans to people who had no chance of paying them back), and were paid by the sellers of those securities to do so:

Credit rating agencies and the subprime crisis - Wikipedia, the free encyclopedia
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Old 29th Apr 2010, 09:11
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The ratings agencies such as S and P do quite a lot of careful benchmarking when it comes to sovereign (i.e. Government) debt. But they do so in a world of imperfect information and sometimes get things wrong, or sometimes their re-ratings lag behind what the bond market has already figured out, so they have no effect.

IB 4138, your post may have been prompted by the recent downgrading of Greek sovereign debt. Given what we know about Greece it is hard to disagree with the verdict: their finances are a total basket case, and blaming the ratings agencies is a case of shooting the messenger.
The main criticism to be made of the ratings agencies is in the area of corporate bonds. They are paid by the issuers of the bonds which are being rated. While it is common enough for firms to finance the costs of regulation via some general levy, going along to S and P and saying "rate my bond and here is $1m" is a case of obvious conflict of interest.

I sometime wonder why governments and regulators are so slow to move to a reform in this area.
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Old 29th Apr 2010, 13:04
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...they did not only downgrade Greece which was evident, now they do it with Spain, next will be Ireland followed by Italy......
imho, it's part of an economic war, it's the Americans who just want to destroy the EURO credibility, in favour of the Dollar.

By the way, American companies helped Greece to become a member of the EURO-countries. e.g. with faked money transfer bookings, etc.
Why didn't they downgrade Greece at this time already....

Last edited by Airbus_a321; 29th Apr 2010 at 14:18.
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Old 29th Apr 2010, 13:21
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Vampire Squids

It was the Vampire Squids wot done it......................allowing our esteemed Greek friends to, er, "spin" their debts.
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Old 29th Apr 2010, 13:58
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I am uncomfortable with the seeming lack of oversight of the credit rating agencies, especially when they can do to a country what no army could and in quicker time. In this (these) case(s) it is destabilising the EU and you have to wonder if there's at least a little bit of subtle geo-political manipulation going on behind the scenes. As long as everyone on the merry-go-round was making money, they all looked the other way.

It looks, however if the sh1t is about to hit the fan in several juristictions in the next while. Things will go on, as they always do, but i'll wager joe public won't be richer for it.

Humour......How much does a Grecian Urn ? After the crisis, not much....



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Old 29th Apr 2010, 14:37
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SpringHeeledJack, Airbus A321: you over-rate the influence of the agencies, at least when it comes to Government Debt. When Ireland was downgrded (twice ?) during the last 2 years, there was virtually no impact on financial markets, because the downgrades merely reflected what everyone in the bond markets knew already. Maybe the Greek downgrade had an effect because of its timing: people were feeling very jumpy about Greece for some months anyhow.

There is so much public knowledge about national economies (or at least those which matter a bit) that the rating agencies do not add all that much information. They may have an influence on whether one's bonds are accepted by the ECB as collateral, but even if the agencies did nothing, the yields on Junk-ish bonds would send a strong signal to the ECB about what they should accept.

Downgrading Spain and Portugal is no surprise: there was widespread fear of contaigon before the downgrades, which in my view largely ratified things.
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Old 29th Apr 2010, 14:45
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Public sector pensions and pay

Greece is facing a problem with excessive public sector pensions and pay.

Their problem is minor compared to the UK's problem in a few years time. Our public sector has ballooned under B.Liar and the Bigot-finder...................as have their pay ............and their pensions are not sustainable.......................AND - which Civil Servant, exactly, is going to recommend the required remedial action?? Sir Humphrey??

In 5 - 10 years time, the IMF will be required to rescue Sterling.
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Old 29th Apr 2010, 14:51
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NORFOLK, VIRGINIA (The Borowitz Report) – Eleven indicted Somali pirates dropped a bombshell in a U.S. court today, revealing that their entire piracy operation is a subsidiary of banking giant Goldman Sachs.

There was an audible gasp in the courtroom when the leader of the pirates announced, “We are doing God’s work. We work for Lloyd Blankfein.”

The pirate, who said he earned a bonus of $48 million in dubloons last year, elaborated on the nature of the Somalis’ work for Goldman, explaining that the pirates forcibly attacked ships that Goldman had already shorted.

“We were functioning as investment bankers, only every day was casual Friday,” the pirate said.

The pirate acknowledged that they merged their operations with Goldman in late 2008 to take advantage of the more relaxed regulations governing bankers as opposed to pirates, “plus to get our share of the bailout money.”

In the aftermath of the shocking revelations, government prosecutors were scrambling to see if they still had a case against the Somali pirates, who would now be treated as bankers in the eyes of the law.

“There are lots of laws that could bring these guys down if they were, in fact, pirates,” one government source said. “But if they’re bankers, our hands are tied.”
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Old 29th Apr 2010, 16:33
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Airbus, not as wild an assertion as some here might think.

This bloke's little book opens a few eyes !

Confessions of an Economic Hit Man, by John Perkins--the shocking real-life story of how America built an empire on third world debt

Or, get a flavour here :-



Last edited by El Grifo; 29th Apr 2010 at 17:18.
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Old 29th Apr 2010, 17:29
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S&P provide a financial instrument rating service. Its customers pay for the quality of research S&P have traditionally done. While they have made mistakes, most notably during the recent past, they have built an enduring reputation for their assessments and that is why they sit atop the world's rating agencies.

Find a better source if you can. No one requires you to accept S&P's word. Their business is nothing without general respect for the reliability and integrity of their grading of securities and other financial instruments.
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Old 29th Apr 2010, 17:48
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From the much berated Wikipedia :-

Credit rating agencies such as Standard & Poor's have been subject to criticism in the wake of large losses beginning in 2007 in the collateralized debt obligation (CDO) market that occurred despite being assigned top ratings by the CRAs.

Credit ratings of AAA (the highest rating available) were given to large portions of even the riskiest pools of loans. Investors, trusting the low risk profile that AAA implies, loaded up on these collateralized debt obligations (CDOs) that later became unsellable. Those that could be sold often took staggering losses. For instance, losses on $340.7 million worth of collateralized debt obligations (CDOs) issued by Credit Suisse Group added up to about $125 million, despite being rated AAA by Standard & Poor's.

It is also worth mentioning that Standard & Poor's apparently failed to predict the bankruptcy of all the largest Icelandic banks and a weaker position of the Icelandic Government in 2008, a country that had a very high rating until its economy suddenly collapsed.

Companies pay Standard & Poor's to rate their debt issues. As a result, some critics have contended that Standard & Poor's is beholden to these issuers and that its ratings are not as objective as they should be.
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Old 29th Apr 2010, 17:50
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But S&P know that if their credibility is lost, their business is toast.
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Old 29th Apr 2010, 17:55
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FT.com / Columnists / John Gapper - Time to rein in the rating agencies

That should explain things nicely I think.

I
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Old 29th Apr 2010, 19:55
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Sceptic though I am with S&P, I have to say that they have got Greece's position spot-on. With overnight rates at 9% (I did hear 18% last night) it merely reflects the Risk / Reward of owning such debt.

One independent economist reckoned the Greek public sector would have to be cut by around 30% (headcount) and the salaries / wages / pensions of the remainer cut by another 25% to get things back into balance.

Wouldn't be at all suprised to hear similar figures across many developed economies in the next 2-3 years.
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Old 29th Apr 2010, 19:58
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El Grifo, Thankyou for that link.

His lecture is truly fascinating and well worth watching in full.

The second part is at this link.

He also spoke well more recently in this interview.
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Old 29th Apr 2010, 20:46
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Perkins is fascinating but he is a fantasist. To claim that the poor in the third world have not benefitted from the support of the World Bank is ridiculous. No doubt he claims the Bilderberg Group is a secret cabal bent on world domination
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Old 30th Apr 2010, 01:30
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S&P provide a financial instrument rating service. Its customers pay for the quality of research S&P have traditionally done. While they have made mistakes, most notably during the recent past, they have built an enduring reputation for their assessments and that is why they sit atop the world's rating agencies.

Find a better source if you can. No one requires you to accept S&P's word. Their business is nothing without general respect for the reliability and integrity of their grading of securities and other financial instruments.
Here's to second the notion that realists in finance appreciate clearly that S&P is far from infallible. Anyone who follows S&P ratings in detail knows that inconsistencies, sudden reversals of direction, and disagreement of opinion with other ratings agencies are quite common in their ratings. Such is the nature of forecasting money and finance-- a long-shot at best. The best one can say is that they are what they are - somewhat consistently.

Ratings agencies are influenced by global opinions - in fact most ratings are a guess at the match-up between numbers published by the entity being rated and the skeptical opinions of critical analysts all about the world. Finally an important decision such as this boils down to the judgment of a committee and then approval by one or more individuals - knowing that any error in an opinion is bad for S&P, and time will soon reveal much information that cannot presently be known with certainty.

Folks in bars in the banking centres of Euroland have been saying " ďt's about time to address (the fiscal problems of Greece and others)" for a year or more, so the sound of the shoe falling is not exactly a surprise to anyone.

Just wait for the screams when some econo-ratings boffin blacklists California!!
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