The financial crisis showed us not only that Credit Rating Agencies were incompetent, but also that they stopped financial markets acting responsibly. It is worrying that investors, and journalists, continue to listen to them, as they could put millions of jobs at risk
Last year, Derren Brown did a television “magic trick” in which he claimed to have predicted the results of the National Lottery. As each number was announced by the lottery, he revealed what his own prediction had been.
As magic tricks go, it was stupid. David Mitchell summed it up on Mock the Week when he said that Brown’s only real trick had been to make people believe it had been a “prediction” of the lottery numbers – when in fact he was reading out the numbers after they had been announced.
Brown might well have drawn his inspiration from the murky world of Credit Rating Agencies (CRAs). From autumn 2007 CRAs began to downgrade their ratings on billions of dollars worth of complex financial derivatives. The ratings, which claimed to predict the likelihood of default on a particular security, were being downgraded only after defaults had started to mount up.
► Continue reading Disgraced credit rating agencies are being allowed to wield too much power



