After Standard and Poor downgraded the debt rating of the US, some people noticed that this was the same company that had given AAA ratings to some of the real estate derivatives that had recently gone south. Not only that, but the result of the downgrade was that the stock market dropped, and people reacted by putting their money where it would be safe — in US treasury bonds, which supposedly were just declared less safe.
It does make you wonder about what these supposed rating services do. Well, you don’t have to wonder any more. A recently retired senior vice president of Moody’s rating service is pointing out that these companies are rife with conflicts of interest, corruption, and greed. Which should be a surprise to nobody, since these companies are paid by the companies who are getting their financial products rated, so if they don’t like a rating they can simply take their business elsewhere. Talk about a recipe for disaster.
In fact, after reading this my only question is why anyone takes these rating companies seriously, or pays any attention to their obviously meaningless ratings, since a corporation can buy any rating they want.