Governments including State Govts are courting the Ratings again.
With an AAA, the world is your oyster. Financial institutions will scramble over each other to lend to you at the cheapest possible rates.
But have the Ratings Agencies cleaned up their act?
http://business.smh.com.au/business/ratings-agencies-carry-on-as-if-nothing-has-happened-20090327-9e58.html
Extract below from above SMH article..
“But how scientific are these ratings? Who is on the judging panel? And how accurate are they?
Let's start at the last question. In terms of accuracy, their record is nothing short of appalling.
These are the are people who brought you Enron, who claimed the biggest corporate scam in US history was a fabulous
investment opportunity just a few weeks before it collapsed.
And not just Enron. The agencies gave the nod of approval to a whole range of dotcom darlings, including Worldcom, which lost billions of dollars in shareholder funds and where executives found themselves before courts and in jail.
But if you thought they'd learnt from that horrible and hugely embarrassing experience, you'd be dead wrong. Because around the time they were copping a shellacking over the dotcom collapse, in 2001, the ratings agencies were sowing the seeds for the downfall of the Western capitalist system as we know it
A huge number of unscrupulous participants played a role in the American real estate boom that has since brought the system to its knees.
But it was the ratings agencies that provided the legitimacy for America's investment banks to pump up the market, to sell collections of high-risk loans to vast numbers of unsophisticated investors around the world, and all under the mask of a gold-plated AAA rating.
Just in case you missed the point, you had subprime loans to home buyers - which by definition were loans to people with a history of default - being packaged up, diced and spliced and repackaged as low-risk investments.”
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