Saturday, August 28, 2010

No Legal or Official Reason to Trust the Rating Agencies

I had posted this on my facebook wall some time ago, which is not easy to search through nor is it well-suited for blog-size posts. Hence reproducing here as the information is eye-opening.

“they’re winning because this is not a level playing field.”


The Ratings agencies (Standard & Poor’s, Moody’s and Fitch):

1. have NO duty to be correct.
...'the companies didn’t owe ... a “duty” — a legal obligation that could form the basis of a negligence claim'

2. have NO shared responsibility.
'judges have rejected the idea that the rating agencies worked so closely with the investment banks that they were essentially co-underwriters'

3. are NOT experts
'a regulation exempts rating agencies from the definition of “experts” who can be sued'

4. have NO conflict of interest - because you already know about it!
'it has been around so long and is so widely known that it isn’t a cause of action'

5. are merely expressing OPINIONS
'their grades are just opinions about the future'

6. are protected by the First Amendment
"and therefore entitled to robust First Amendment protections, like those afforded journalists'

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Is the world upside down?

Is the world upside down?
It's a topsy-turvy world out there!