They have been likened to a world superpower, capable of bringing down a country. But the three major credit rating agencies in New York use neither missiles nor bullets.
Standard and Poor’s, Moody’s and Fitch can put a bomb under a nation’s economy simply by changing their advice on its credit-worthiness.
Their opinions are supposed to help investors judge the likelihood of making a return if they lend a country money, for instance, in the form of buying bonds.
The influence of this group of economists based in New York reaches far and wide. Earlier this week, they downgraded the creditworthiness of Spain and Portugal and told investors that Greek debt is junk.
But in Germany the finance minister played down their influence and urged against a knee-jerk reaction.
Wolfgang Schaeuble said: “Perhaps the approach we are taking is the more important one, on a European and a national level, to better monitor the rating agencies. No market participant is prevented from not taking the agencies too seriously. The seriousness with which they are taken today is a little exaggerated.”
Critics also point out that before the financial crisis the agencies labelled toxic mortgage-backed assets as a good buy. And the fact that they are paid by the institutions they rate has led to claims that they are about as independent as a judge who is paid by the prosecution.
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