Did Rating Agencies’ Vindictiveness Cause the Current Volatility?

August 11, 2011

According to this great NY Times article, Standard & Poor’s–which was caught sleeping during the financial crisis in ’08–is now reacting to the government’s effort regulate the rating agencies by downgrading U.S. Treasuries.  The article’s theory is that the S&P is trying to extort the government by tying U.S. Treasuries’ ratings to the amount of scrutiny the rating agencies receive.  I have no doubt that this is the case.

For some reason, S&P is trying to throw the world economy into a clothes dryer to vindicate its wishes of autonomy.  If so, S&P could, theoretically, be violating federal securities laws by manipulating treasury securities prices for its own gain.

This shows how bogus and petty the agencies can be.  The government should double down on its efforts to regulate/prosecute S&P.

 

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