Should it really be the case that the three major rating agencies, Standard & Poor’s (S & P), Moody’s and Fitch downgraded the creditworthiness of the U.S. that would mean a further tightening of the U.S. debt problem? Because according to the rated as more risky government bonds higher returns would be demanded.
The consequence would be the annual interest expense and thus increase current spending. A downgrade of the United States is not only a disaster for America. The loss of the top rating of forcing creditors worldwide to assess their assets and redistribute. Because the scores of CRAs by state financial regulators have a financial basis, they expose banks and insurance companies of “stress tests”.
The judgment of the rating agencies is authentic. This outstanding special position of the rating agencies and it is more than critical. For whoever controls the rating agencies? No one! For everything that happens in the financial markets, there are supervisory bodies – but not for the rating agencies. S & P, Moody’s and Fitch Ratings are nothing more than private companies are whose primary goal is profit maximization.
They are not subject to an independent arbitrator and hardly any competition. They are part of the financial world and pursue their own interests. The reform must be found. To change the economic sources of the credit rating agencies would be a first step towards improvement.
One possible approach is if all participate in an evaluation by independent rating agencies are interested by a compulsory levy to pay. A disclosure of the valuation models and stricter oversight of the rating agencies would be interested linkages further steps. More important would be to the credit rating agencies to take responsibility for their ratings and make them normal players on the stock exchange floor. According to other views, it is a wrong direction. It is said that the tips of the policy and the financial sector are geared too much.
Obviously, have no interest to competition. As the agencies are large, they can generate predictions that come true automatically. Nevertheless, there are many market participants, which follow them. The same goes for banks. They could be allowed to fail. The more participants and the more competition, the more efficient the market acts.