Downgrade S&P! Rating Agencies “Harm The World” and Should Not Exist, Says Prof. Black

all amercian and european companies should terminate their business relationship with S&P --- they do not deserve to exist as a company

Investors should do their own due diligence on their potential investments and should not rely solely on the opinion of the rating agencies. These rating agencies have a history of coming late to the party. After all, they are being paid for their rating. So how can they be objective. Their opinions are worthless.

This is what I think of Standard & Poor's, that just dropped the US debt outlook.

According to my information, belief and opinion,

S&P made billions by rating toxic assets as Triple A;

S&P rated Bear Stearns as investment grade; shortly thereafter Bear Stearns failed, being
bought out by JPMorgan Chase for $2a share with a $30 Billion guaranty from the federal reserve [taxpayer money]

Besides Bear Stearns, S&P rated as investment grade, Lehman, Merrill, AIG, and as Triple A Fannie Mae and Freddie Mac. All these corporations failed shortly thereafter.

See the recent movie "Inside Job."

I have wondered for a very long time about the credibility of the ratings agencies and what gives them such a capacity to determine the worthiness of nations and companies. As this article says quoting Prof. Black, whom i have also never heard of before, these rating companies have gotten it all wrong so often that it seemed that they had to be in collusion with at least some of those that were rated AAA. If not, how could they all have declared that MBS and CDO's were to be among the highest rated investments, when they have proven to be disastrous failures if not scams. Why are those who gave these AAA ratings not in jail already? They have caused more harm to the world than petty criminals like Bernie Madoff.

It's one big joke. These are the same @#$% that stamped the mortgage securities with a Triple A rating without so much as a look see. They basically cashed their commission checks without lifting a finger. The banks were looking to unload the mortgages that the Feds pressured them to make with the rating companies and AIG helping them do it. They took their cut and sold the mortgages to companies like Citi group mortgage who then packaged them into lots of 100 mortgages and called them mortgage backed securities with a Triple A rating from these rating companies. Citi then sold them to Wall Street firms like Goldman Sachs, Bear Stearns and others. Wall Street then sold these on the open market to China, Germany, UK, Iceland and others.

The Feds were asleep at the wheel and they started the whole fiasco with Clinton and the Bush administrations threatening the banks to lower their standards for obtaining a mortgage or else. The banks obeyed but along the way they found it made them a lot of money. All they had to do is unload the mortgages as quickly as possible before the @#$% hit the fan. The AIG's of the world insured the banks so the banks felt like it was as safe as it gets. AIG didn't check any of the rating agencies as they were up to their ears with requests. They just closed their eyes and raked in their cut of the pie. So we have the banks and other mortgage originators making lots of money. The rating agencies making lots of money. AIG and other insurers making lots of money. The mortgage consolidators like Citi Group making lots of money. The Wall Street investment firms making lots of money. Did I forget to say the Feds were making money as well.

So what happened to this little hot potato mortgage pipeline profit game they were playing? A little bank complained that the bigger banks had a sweeter deal then they did and felt they were being treated poorly by the rating agencies. That was the beginning of the end as the regulators ordered the rating agencies to reevaluate all the past securities. China's first billion dollars worth of securities suddenly lost 750 million in a blink of an eye. The gig was up and anybody left holding mortgages no longer had a place to sell them. The ones who had the most mortgages left in their hands lost their butts. Sort of like the kids game of Go Fish but with an OLD MAID twist as they could no longer sell their OLD MAID mortgages as the buyers were now wise to their shenanigans.

So here we are today with all the players denying any wrong doing. Clinton says don't blame me. Bush says I had a democratic congress who made the rules and I believed it's an Americans right to own a home. Greenspan said I didn't see it coming and nobody is to blame. Henry Paulson said he didn't see it. He was the one that spearheaded the law changes to allow Wall Street to increase the leveraging limits and be shed of government watchdogs. He's the same guy who ran Goldman Sachs and his net worth is over $700 million. Bush made him Treasury Secretary which sounds to me like hiring the fox to guard the chicken house.

So now we all know who pays for this mess. We the People. We get to bail out the banks, the Wall Street gang, AIG and all the others. Who was prosecuted? NOBODY. They all get to retire with big pensions to write a book and make more millions. Go on the speaking circuit and tell everybody how great and God like they have been in their careers.

Most of these thieves are Harvard graduates saying they didn't see the housing bubble collapse coming. Either they are the dumbest bunch of Harvard Grads or thieves with a high class education. What do you think? I don't think you get that rich by being stupid which leaves only one option left. They can now say they might have made a little mistake but they still have their millions and We the People are left holding the proverbial bag. The headlines yesterday on Yahoo Finance said Congress is looking to pass a Bank Lending law. TOO LATE STUPID.

I agree that all the rating agencies have no credibility. However, those who say you should do your own "due diligence" are halucinating. Do due diligence based on what? The financial statements issued by these large public companies cannot be relied upon and I have come to that conclusion after speaking with a number of my CPA brethren, and the consensus of opinion is exactly that. To say you should depend on the integrity of these commercial institutions is not realistic. I have no idea where to turn at this juncture. Ethics are non-existant.

Read Taleb. Ratings companies cause fragility in the markets. If they are right, nothing particular happens. If they are wrong, it's disastrous. However, if the ratings companies were eliminated today, new ones would spring up tomorrow because they provide a service lazy people want - to make their decisions for them.

Go lemmings go!

No wonder we're all but bankrupt! The Chinese own 50% of us already. Our politicians are prostitutes...the Chinese are their pimps...and nearly half of America fails to realize a problem exists!

If you hog tie the wolf watching the chicken coop and then tape his mouth closed, I suspect you could then let him watch the hen house. But not until then. Beam me up Scotty. No intelligent life here in the financial industry, or political arena.

I agree with him about the ratings agencies being dishonest, but he is saying the US will "never" default. When you consider the fact that the US is borrowing money to pay the interest on this borrowed money one has to wonder: How long can America do this? According to history, every empire, no matter how strong, when running an excessive deficit eventually faced major trouble over time. Look at the Roman empire, Byzantine empire, British, etc. Why would anyone not feel worried about our deficit? The national debt is at $14trillion (98% of our GDP), and unfunded liabilities are at $135 trillion. When does this end? Why should I not feel worried? The IMF and World Bank both downgraded US treasuries, China downgraded them two years ago, and Brazil refused to buy US treasuries just 3 days ago. I would seriously like him to explain to us why we shouldn't worry about this.

Wall Street a FRAUD .. use FBI and RICO LAWS on Wall Street ORG CRIME SYNDICATES. We invested in AIG after Wall Street analysts gave AIG a CLEAN bill of HEALTH .. 28 days later AIG collapsed! We lost $18,000 of retirement income but Goldman Sachs got an 8 BILLION dollar back door payment from USA taxpayers bailout and ex AIG CEO Greenberg keeps a $4.2 BILLION slush fund in Cayman Islands account. NOT a single investigation, Not a single PRISON term ..@#$%! Bust the Wall Street ORG CRIME syndicates NOW.

prof black is a socialist protecting his political points of view, rating agencies are not perfect but far more efficient than the GOVERNMENT!

ASK YOURSELF THIS "WHO IS WATCHING THE WATCHERS" .?

Black is wrong about default risk. Just because there is no political will NOW for balancing the budget (which would seriously risk defaulting on our debt), there is a rising tide among the citizenry for fiscal reform, balancing the budget, banning bailouts, shuttering the Fed, and downsizing banks. However, he is right about the usefulness (or lack thereof) of the ratings agencies: they do harm by becoming the opinion of last resort, which removes the need for due diligence by most investors.

Yes, they are the force behind hedge funds and because of their lies they can keep from going to jail because their lawyers state it is only a Opinion. These lying ratings should have a warning that states " this is only a opinion, it has no facts behind it and do not believe it"

I have been wondering if would be possible to do away with the oil futures markets and let the law of supply and demand control the price of oil and all other goods that we purchase every day. I am not an economist so I don't know if such a thing is possible.

Lending is all about TOMORROW's money TODAY. If you are unlikely to have money tomorrow you are unlikely to be given money today. The US is unlikely to have any surplus in the forseeable future ( as it did in late nineties) and the debt levles will only keep going up. In the early nineties, politicians were fighting to raise the limit to 3 T and now twenty years later, it is over 14T. Soon this will not be enough and politicians will once again come for an increase in debt ceiling.
S&P should have downgraded the US debt long long ago. Still it is better late than later.

At some point of time lenders will realise that the emperor does not have clothes.
Using GDP as a denominator is absurd. You cannot repay debt with your gross income or the revenue of a company or the GDP of a nation. You can repay ONLY with future surplus - which is simply not to be seen.

I worked for S&P as a bond analyst years ago. Up until this ridiculous rating action, I had the highest regard for S&P and my former colleagues. Changing the outlook for the United States of America from "Stable" to "Negative" is ludicrious. As Professor Black says, there is no probability of default for US debt. S&P's action is at best political motivated and if so, that is very disappointing at the least, S&P has previously always and presently needs to stay out of politics.

Another member of Academia that sits and pontificates the ideal society in a vacuum absent of reality. Paid to ponder and get published...rather than educate. This is what government grants to Universities has bred. These people are not accountable for anything, work less than the private sector employees, and feel they are smarter than everyone else. The day of reckoning is coming. The American tax payer is tired of the lack of accountability and reckless spending by their government.

WHEN are these criminals going to PRISON for their fraud? They played a very large part in swindling millions of Americans out of their savings, homes, jobs and retirement?