Some background on the credit agencies that threaten to downgrade the U.S.'s credit rating, which in turn will likely raise interest rates across the board. From the Daily Beast:
How did it come to this—that a trio of private-sector companies could wield such enormous influence? More specifically, a trio that has proven chronically behind the curve, analytically compromised, and complicit in the financial crisis of 2008–09 as well as the more recent euro-zone debt dilemmas? Somehow, these inept groups again find themselves destabilizing the global system in the name of preserving it.
While there are more than 100 credit-rating agencies worldwide, three—Moody’s, Fitch, and Standard & Poor’s—occupy their own particular universe, the products of a New Deal ruling from the SEC that enshrined "nationally recognized statistical rating organizations” to ensure that the bonds held by insurance companies, banks, and broker-dealers were appropriate for their capital requirements.
From this well-intended decision, three new private-sector firms attained the status of government regulators but with none of the oversight
Andrew Sullivan speculates that our credit rating may be toast.
For info about each:
- Moody's.
- Fitch.
- Standard and Poor's.
