One of the main justifications offered by the coalition government for sticking to its austerity policies is a fear that the UK would otherwise lose its ‘triple A’ rating from the credit rating agencies.
But why should we trust the judgement of the credit rating agencies? Ever since they gave the thumbs up to subprime mortgages and helped trigger the banking crisis of 2007/8, more and more of their misjudgements have come to light.
The USA is currently being entertained by the Justice Department’s five-billion-dollar lawsuit against one of these agencies, Standard & Poor’s, which is accused of defrauding investors by issuing ratings on subprime mortgage securities that it knew to be misleading.
There is no doubt that the credit rating agencies bear a lot of responsibility for the current crisis, since they certified that very risky financial products were safe investments. The question is whether this was stupidity or fraud.
Either way, clowns or crooks, there is no longer any good reason why these agencies should remain the final arbiters of economic policy.
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