Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Credit Firms Tell Clients Not To Use Their Ratings?

Interest-Rates / Credit Crisis 2010 Jul 22, 2010 - 02:42 PM GMT

By: Dian_L_Chu


In an article dated July 12, I first reported that Dagong International Credit Rating Co., the largest credit rating agency of China, stripped the the U.S. and some other western nations of the AAA ratings given by its big three Western counterparts. Dagong also accused its Western rivals of not properly disclosing the repayment risk and causing the global financial crisis and current debt crisis in Europe.

This week, Guan Jianzhong, chairman of Dagong, made some more followed-up comments. In an interview with Financial Times, Guan further criticized the three dominant global credit firms--Moody's, Standard & Poor's and Fitch—had become politicized, “too close to the clients”, and highly ideological thus losing their objectivity.

As if to confirm the Chinese slam (not their intentions, I'm sure), WSJ reports today the U.S.-based big three have made an urgent new request of their clients: Do not use our names on bond issues.

Why? Because the new Dodd-Frank financial reform law makes the agencies liable for their ratings effective immediately. So, instead of defending and standing behind their work, Moody's, S&P and Fitch essentially telegraphed this message to the world--"China is right - Do Not Trust Us."

The big three credit firms have been highly criticized in the aftermath of the global financial crisis. However, due to the lack of competition, their upgrades and downgrades still impact the markets considerably. Furthermore, in what appears to be a joint effort to remain relevant, the big three seem to have got into a habit of issuing downgrades right in the middle of trading hours, distressing the markets and investors.

Feeling victimized by the big three, the European Union (EU) had announced that it would set up its own ratings agency. A recent Xinhua editorial also noted

“To reform the West-dominated international financial order, more credit ratings agencies should be set up in non-Western countries to break Western monopoly over the global credit ratings”

China, the largest sovereign debt holders of the world, with a record 2.454 trillion dollars at the end of June, undoubtedly would like to have a bigger say as to the risk and reward Beijing deems appropriate for its investment. In that regard, we pretty much know Beijing's thoughts judging from the sovereign credit ranking issued by Dagong, which in many ways contradict the big three.

With China's growing influence on the global stage, credit ratings coming out of China should be expected to win greater recognition over time. The new “revelation” from the big three most likely will only help this evolution along.  The ongoing global financial crisis has prompted some seismic shift in almost every industry. The credit rating services, somehow seems to have escaped unscathed, is definitely long overdue for a major shake-up or two.

Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to Seeking Alpha, Zero Hedge, and other major investment websites. Ms. Chu has been syndicated to Reuters, USA Today, NPR, and BusinessWeek. She blogs at Economic Forecasts & Opinions.

© 2010 Copyright Dian L. Chu - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in