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S&P gets dropped by municipalities

This final note today, in which S&P gets the bum's rush.

At least three municipalities across the country have decided they no longer wish to do business with the ratings agency. The city of Los Angeles; Manatee County, Fla.; and San Mateo County, Calif., all had their credit ratings reduced by S&P last week from AAA to AA, much like the federal government.

So officials in all three places promptly canceled their contracts with S&P, contracts in which they paid S&P to rate the bonds they issue to raise capital.

Take that.

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Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.
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This is not a matter of canceling a contract because they were dissatisfied with a rating; it's a matter of many of us losing faith in the competency of S&P. S&P is alone in their evaluation of US debt. Neither of the other 2 major US credit rating agencies is in agreement, & judging by the government securities market, no one else in the financial industry anywhere in the world agrees with S&P’s evaluation. And it is no coincidence that they were under government investigation when they issued this rating. S&P’s own statement made it clear that their action was not intended as an evaluation of the US economy, it was directly aimed at the US congress. S&P has shamelessly engaged in a purely political, and self serving move. Combine this with their highly questionable actions during the the housing bubble, and financial crisis and it is clear that they no longer have much credibility with investors or any thoughtful observer.

This is not a matter of canceling a contract because they were dissatisfied with a rating; it's a matter of many of us losing faith in the competency of S&P. S&P is alone in their evaluation of US debt. Neither of the other 2 major US credit rating agencies is in agreement, & judging by the government securities market, no one else in the financial industry anywhere in the world agrees with S&P’s evaluation. And it is no coincidence that they were under government investigation when they issued this rating. S&P’s own statement made it clear that their action was not intended as an evaluation of the US economy, it was directly aimed at the US congress. S&P has shamelessly engaged in a purely political, and self serving move. Combine this with their highly questionable actions during the the housing bubble, and financial crisis and it is clear that they no longer have much credibility with investors or any thoughtful observer.

In three fell swoops the towns have highlighted the genesis and core of the entire problem with the ratings industry. OT1H, it's pretty lame that anyone would cancel their contract because they were dissatisfied with the rating.

OTOH, maybe people will recognize the industry for what it is.

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