If parliament and the mainstream media were to be believed,
ratings agencies are solely responsible for the world's
economic woes. By irresponsibly providing triple-A ratings to
products backed by dodgy assets, they have spooked investors,
provoked a credit crunch, and prompted a recession. Or so the
But of the complaints levelled at the ratings agencies, few
are justifiable. Were ratings inaccurate? No. Moody's
downgraded $75.9 billion of asset-backed collateralised debt
obligations (CDOs) in 2007 but gave a true picture of the
likelihood of these CDOs defaulting from the available data.
Was it misleading to give structured products and a treasury
bills the same rating? Not if investors read the accompanying
documentation and knew what they were buying. Were the ratings
agencies impenetrable fortresses of mysterious methodology?
The ratings agencies are guilty of little more than being
easy targets. Some investors have been lazy and stopped