Tuesday, April 19, 2011

Why is Standard and Poor's Being Taken Seriously?

Yesterday Standard & Poor's issued a warning to the United States that it might downgrade the rating of our country's bonds if our politicians can't come to an agreement on our budget problems. The major media reported this story without comment, as if there was no question about the standards and reliability of this credit rating agency.

What a short memory this country has, and it seems to be getting shorter every year. It was only two and a half years ago that the economy was falling off a cliff, and a major contributing factor to the crisis were the credit rating agencies, like Standard & Poor's, that had given AAA ratings to junk, including those mysterious collateralized debt obligations.

My first reaction was that this was a manipulation of our political process by a financial company. When I looked up S&P on Wikipedia, there is a claim that the company did exactly that in Ireland a couple of years ago:

In April 2009 Standard & Poor's called for "new faces" in the Irish Government, which was seen as interfering in the democratic process. In a subsequent statement they said they were "misunderstood".

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