{"id":12177,"date":"2011-11-23T08:52:06","date_gmt":"2011-11-23T12:52:06","guid":{"rendered":"http:\/\/quotulatiousness.ca\/blog\/?p=12177"},"modified":"2011-11-23T10:56:43","modified_gmt":"2011-11-23T14:56:43","slug":"tim-harford-on-credit-rating-agencies","status":"publish","type":"post","link":"https:\/\/quotulatiousness.ca\/blog\/2011\/11\/23\/tim-harford-on-credit-rating-agencies\/","title":{"rendered":"Tim Harford on credit rating agencies"},"content":{"rendered":"<p>I think it&#8217;s safe to say that he&#8217;s <a href=\"http:\/\/timharford.com\/2011\/11\/what%E2%80%99s-all-the-fuss-and-bother-about-ratings\/\" target=\"_blank\">not over-impressed<\/a> with the organizations involved in doing credit risk assessments:<\/p>\n<blockquote>\n<p><strong>What are rating agencies again?<\/strong><\/p>\n<p>They are private companies that express opinions about the likelihood that, for example, Italy will pay the money it owes bondholders. Sometimes they express opinions about how much money people will get back if Italy defaults on its loans. One way or another they\u2019re providing opinions about the risks that creditors face.<\/p>\n<p><strong>That\u2019s it? Just a bunch of opinions?<\/strong><\/p>\n<p>Basically, yes. And there are plenty of other opinions out there from journalists and particularly from people who put cash on the line and buy and sell these bonds. But the rating agency opinions have real-world significance in a way that a bloke in the pub doesn\u2019t. Many investment funds promise their investors that they will only hold assets with ratings above a certain level. If a rating is downgraded, those funds have to sell, even if they think the asset is a bargain. Ratings are also hard-wired into regulatory rules, with similar effect. And another thing: unlike most opinions, they\u2019re quantified.<\/p>\n<p><strong>Quantified on a scale of 1-10?<\/strong><\/p>\n<p>No, quantified on a scale of D through CC+ and BBB- all the way to AAA. Or alternatively, au choix, from C through Caa2 and Ba1 to Aaa. Depending on which agency you\u2019re looking at.<\/p>\n<p><strong>Why?<\/strong><\/p>\n<p>For ABSOLUTELY NO GOOD REASON.<\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>I think it&#8217;s safe to say that he&#8217;s not over-impressed with the organizations involved in doing credit risk assessments: What are rating agencies again? They are private companies that express opinions about the likelihood that, for example, Italy will pay the money it owes bondholders. Sometimes they express opinions about how much money people will [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[25,84],"tags":[436],"class_list":["post-12177","post","type-post","status-publish","format-standard","hentry","category-economics","category-government","tag-banking"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p2hpV6-3ap","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/12177","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/comments?post=12177"}],"version-history":[{"count":1,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/12177\/revisions"}],"predecessor-version":[{"id":12178,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/posts\/12177\/revisions\/12178"}],"wp:attachment":[{"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/media?parent=12177"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/categories?post=12177"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/quotulatiousness.ca\/blog\/wp-json\/wp\/v2\/tags?post=12177"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}