Who Are the Credit Rating Agencies?
Credit Rating Agencies are made up of a few unelected people in various committees who decide whether an entity, public or private, is credit-worthy. They have secret methodologies on how they arrive at their analysis. To date, they prefer to keep their logarithms to themselves. However, how unbiased and impartial are these agencies? How do they make their money?
Credit rating agencies may act as if they are totally unbiased or nonpartisan, but they also have their own agendas and self-interest for survival.
The new Dodd-Frank Financial Reform Law may scare credit rating agencies like Standard & Poor’s, Fitch, and Moody’s because new rules and regulations would require these credit agencies to have a level of transparency that could reveal their soft underbellies.
Do Credit Rating Agencies Act Like Mean Girls?
Mean girls in high school have their own ranking system and it is usually based on whether people live up to their own self-interested and biased ideas of who ranks and who does not rank. Mean Girls use rumors, gossip, bullying and exclusion as their weapons as part of their narcissistic nastiness. Did Standard & Poor’s recently act like Mean Girls by downgrading the United States?
Mean Girls can be catty and revengeful–especially when they feel threatened.
Mean Girls – You can’t sit with us.
New regulations of Dodd-Frank would hold credit rating agencies accountable for their ratings. If there were large error discrepancies the credit rating agencies would have to reveal their errors and the methodologies behind how they arrived at their ratings and how they would correct their mistakes.
Also–and this is probably the biggest reason the credit rating agencies are not happy about Dodd-Frank–they could be sued for very large sums of money if their ratings resulted in financial and other losses to individuals and entities when the ratings were found to be wrong.
Are credit rating agencies scared of the potential consequences to them as a result of full enforcement and implementation of Dodd-Frank? And are they acting like Mean Girls by launching a pre-emptive “downgrade” threat against the United States?
Even though Moody’ and Fitch still said the U.S. has the full Triple-A rating, Fitch said that their rating may change if the U.S. can’t hammer out a deal to cut over $1 trillion from the deficit.
If the United States makes credit-rating agencies accountable for their ratings, then others around the world might decide to do the same thing and that could be very worrisome and potentially costly to the big credit-rating agencies.
Helpful Tips to Neutralize Mean Girls
- Adult Intervention