Credit rating agencies - prepare to be frightened

Take a look at this week's Financial Times weekend magazine with an excellent article about credit rating agencies. The best narrative I have come across describing the slippery slope in this case Moody's which took from research based culture to publicly quoted enterprise with short term agenda and focus on bonuses.


Another rather shocking piece of evidence is an announcement by Standard & Poor's on October 20th 2008 announcing that 760 mortgage backed securities issued in 2006/7 and given a range of ratings by S&P have been downgraded to negative (access to this document does require registration with S&P). The document gives a fascinating insight into the sub-prime crisis. The sheer amount of money raised through these asset backed securities is frankly awesome with a number over $1bn. What is frankly unbelievable is the number of these securities which were given AAA status. AAA status is given to very few countries and companies but apparently to many of these sub-prime mortgages.

Are the credit agencies in the clear or is there time in the spotlight yet to come?