Tag: rating agency

Today’s (Needless) Hysteria: the S&P Panic (via The Atlantic)

On By southwerkIn business ethics

I find the S&P rating panic to be bizarre. They have decided to throw their weight into politics after a decade of incompetent performance such as giving high ratings to the toxic assets that almost destroyed our economy. This will certainly enhance their reputation for neutrality and judgment. After a decade of predictions, often frightening in their irrationality, why not jump into a new arena of prediction?

These guys shouldn’t be making prognostications. The ones who helped create the current economic mess should be winnowed out between the merely incompetent and those that have committed fraud.

I get tired of these highly paid experts. I have freshmen and sophomores in starting business classes that would never even have considered making this kind of decision.

Perhaps, I should have them send in some resumes.

I guess the air up that at the top of the financial industry is so intoxicating, that these people could think they were so influential that the government itself will bow to their legislative demands. This isn’t Greece or Ireland. This is the United States and if some half-assed twerp thinks this economy rises or falls on his judgment, he needs to be put in his place.

James Pilant

Please read James Fallows’ post on this matter.

I agree with Clive Crook’s puzzlement about the S&P downgrade “bombshell” today:

“S&P adduces no new information that I can see. Competent ratings of opaque instruments such as, oh, mortgage-backed securities would be very useful to investors (not that ratings agencies troubled to provide competent ratings in that case, obviously). But why should anybody need that kind of help in judging the soundness of US government bonds? S&P knows nothing about them that you or I don’t know.”

And I like James K. Galbraith’s derisive guffaw, For More…

Newspaper Business Pages – Wrong, Wrong, Wrong!

On By southwerkIn business ethics1 Comment

(A reprint of a previous column)

I search for people talking and writing about ethics and reform. Since we are discussing business ethics, a good place for me to hunt for these kinds of writers is on the business pages of large circulation newspapers. It’s not much fun. Fortunately not all business writers live in a cartoon like version of our world where noble business men are limited by government regulation from making us all rich and happy, where the chief problem with the stock market is pessimism, and where stupid home buyers ruined the economy, but many perhaps most do.

Look, I believe in free enterprise. I think a business man should be able to make a profit. But a lot of what got us into the current mess had more to do with gambling with other people’s money that it did with investing. Further, I have a strong prejudice in favor of actually making stuff and investing in this nation’s future instead of moving money around as if that was “God’s work.” And if you think, that after seeing how derivatives work, watching the colossal failure of the rating agencies, the incredible passivity of the SEC and other government regulators, and the inability of the government, various huge corporations and the business publications to predict, prevent or ameliorate the current crisis, that I am going to blame individual home buyers for this mess, you just aren’t getting me.

If we just remain optimistic the recovery will continue is a regular thought for many business pages.  Jim Gallagher writing in St. Louis Today says that the principal danger from the Greek bail out and the crisis for the Euro is that investors fearing bad things will happen will behave irrationally and damage the market by selling. He provides reams of data to support his thesis. But in spite of all of his data, I have doubts. The European Common Market is a larger economy than the United States and many of their members are more question marks or problems than we like to acknowledge. I think fear is appropriate.

It’s all that home buying that brought us into this mess is an almost constant refrain. I can’t help but notice it was the collapse of a part of the derivatives market (a 600 trillion dollar gambling casino masquerading as an investment) that destroyed much of America’s economy. I also feel obligated to point out that those nasty, demented, foolish home buyers never seem to have figured out they could package their mortgages as securities, get them triple A status from compliant rating agencies, and then sell all over the world as if they were good investments relieving lenders of any responsibility for their decisions.

They say regulation is a bad idea. There is too much now. Golly Gee, looking over the ruins of the world economy and the thirty million American unemployed, you might think somebody did something wrong. But no, if anything bad happened it was not the fault of the huge investment banks (who got into a little trouble requiring trillions of dollars of bailout money), it was the fault of over regulation. Here’s Thomas Oliver from Atlanta Business News.

Well, so much for my pain. I have found in my searches many authors who inform, enlighten and motivate me.That makes it worthwhile.

James Pilant