Wednesday, August 10, 2011
Credit rating transparency
It's a shame when a credit rating agency's actions, which in theory are meant to increase transparency between borrowers and lenders, seem to reduce transparency about its own methodologies. The U.S. Treasury details the $2 trillion error in S&P's penultimate statistical analysis of the U.S. debt position and states that in response, S&P simply changed its principal rationale for the downgrade. The case for S&P's primary, or only, rationale the whole time being the political stalemate the whole time seems rather convincing in this light, if one believes that an additional $2 trillion in committed deficit reduction would have avoided the downgrade, as was widely reported. It would be nice if S&P made clear the rationales for its judgments rather than listing one that seems kind of bogus.