The role of credit rating agencies
UNSWCommunity asked:
Guest lecture by Brad Walters, General Manager, Financial Analytics, Corporate Scorecard held at the Australian School of Business, UNSW
OH, if you look closely @ 9:41 there’s a fly on his tie!
OMFG, who do I talk to 2 get my last 15 mins back? The guy in the video? SIgh, BFM FML!
Maybe the analysts at Moody’s saw the collapse of
Lehman’s and the real estate asset price bubble, and
realized that all they could do was delay the inevitable,
but that would mean false ratings. Would you tell “the
crew” that “the ship” had hit an iceberg and it was going to
“go under”, or would you delay telling them, while frantically
hoping that a solution would become apparent? In the
movie, ‘Schindler’s List’, they commit accounting fraud in
order to save life. Intent matters.
Team players might be trying to throw a game.
Were bad analysts at Moody’s or S&P part of
a communist conspiracy to overthrow the American
capitalist system? Were they saboteurs? White
collar terrorists? The Soviet Union fell not too long
ago. His quote of Vladimir Putin’s remarks was
interesting. Putin, ex-Soviet patriot, new Russian
Premier, seems well-verse in American capitalism,
but he attended Soviet educational institutions.
credit ratings are like gossip, and can affect the
reputation of a business, thereby affecting its ability
to raise financial capital, and be a “going concern”,
for why would suppliers trust a manufacturer they
felt was not going to be around next year?
“A credit rating to be effective must provide an adequate
early warning of financial distress”.
Yes, well, the static and the dynamic perspective do not
always agree with each other. So, should a credit rating
be a combination of those two factors, or do you need two
metrics: “Here is the net asset value, and it is +, or it is -,
declining or growing.” Also, ratings affect the business:
A negative rating (gossip) can accelerate deteriorating
conditions in a business.