About Rating Agencies

S&P and Moody's both have threatened to cut the top-notch credit rating of the United States' sovereign debt for the first time in its history. As all professionals in credit market know, agency rating is a big factor to determine the borrowing cost. This is very big milestone in the financial market, as the move can push up the cost of credit world wide for many years.

There was an interesting Reuters article explaining the criticality of rating agencies by going through a role they played in recent economic cycles. The article also briefed David Beers, who is the global head of sovereign credit rating for S&P. I have heard about him before, but had no idea who he is, so it was interesting.

I am neither supportive nor against the credit agencies, because there are tons of pros and cons about them. But just like the world is not perfect, it is unreasonable to expect perfection from the rating agencies. Bottom line is that market needs them, and participants, including government, should work together to improve the clarity of information.

http://www.reuters.com/article/2011/08/02/us-ratings-insight-idUSTRE7714TI20110802