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Agencies face flak over ratings
Credit rating agencies, criticised for moving too slowly in cutting ratings on Wall Street firms and the complex instruments they devised, are now accused of acting too quickly.
- Reuters
- Published: 00:04 September 22, 2008
New York: Credit rating agencies, criticised for moving too slowly in cutting ratings on Wall Street firms and the complex instruments they devised, are now accused of acting too quickly.
As the credit crisis enters a new phase, the pendulum has swung too far back, critics argue. The agencies are still missing the mark, but are too aggressive.
Case in point: AIG.
A week ago, Standard & Poor's warned that if insurance giant American International Group didn't demonstrate adequate access to capital in the short term, it could cut its ratings by as much as three notches.
Late Monday, S&P, Moody's Investors Service and Fitch Rating struck a triple blow to AIG's investment-grade rating and warned of more downgrades.
Hours later, the US government rescued AIG with an $85 billion loan, and the trio scrambled once again to revise their outlooks.
"AIG was a signal they are being more aggressive," said Joseph Mason, a professor at Louisiana State University. "They've had their backs against the wall, and they are being forced to cut."
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