The financial markets tremble when the rating agencies disclose their ratings about the credit worth of a country. Government leaders lose their sleep over the rating of their country. But often the ratings of Moody’s, S & P’s and Fitch were incorrect. “It’s just like making a rough estimate, giving a credit rating to a country is nothing but a board game.” – Jerome Fons (Former Director of Moody’s). The rating agencies, or credit assessors, are all over the news. Recently, there has been many downgrades of mainly European countries and companies. With as a consequence troubled financial markets and governments that are getting deeper in financial trouble. Reducing a country’s credit rating can have such major consequences that government leaders, if their credit rating is at stake, are begging on the phone with the credit rating agencies.
Who are these credit rating agencies actually? What do they base their credit ratings on? And are the numbers in the reports they assign to companies and countries correct? For more insight into the power of credit rating agencies, VPRO backlight spoke with Jerome Fons, ex-director of Moody's, David Levey, former head of the Moody's European Country Awards, Timothy Sinclair, Professor of Political Economics at the University of Warwick, and Dirk Müller, former stockbroker at the Frankfurt Stock Exchange. In addition, VPRO backlight looks with Portuguese mayor Carlos Carreiras at the consequences of Portugal's depreciation and talks with Ron Grassi, a retired lawyer who has started a lawsuit against the rating agencies. In VPRO backlight, the story of the rating agencies, their influence on the financial markets and their role in the world. Originally broadcasted by VPRO in 2012. © VPRO Backlight January 2012