Unshackle us from the credit rating agencies…please.
Sir, Gillian Tett in “Fears of crash unfounded – for now” August 18 describes very well the origins to the current market turmoil tracing it back to the American housing markets. Unfortunately she leaves out what is the most important fact we need to be aware of and consider, that is if we want to keep that “for now” where it is.
It was primarily an excessive confidence in the risk assessment done by the rating agencies that managed to catapult what should have remained a small local problem of badly awarded mortgages, into a global mass-confusion. And that excessive confidence sprang foremost out of the fact that our regulators, going against what all human wisdom should have taught them empowered the credit rating agencies to implicitly and explicitly to decide so much about where market should go.
The real truth we need to realize to face is that the better the credit rating agencies could get at what they are supposed to do truth is that the larger could be the build up of really dangerous systemic risks and therefore the bigger the ensuing explosion.
I am not against credit rating agencies. I will always use them. But please unshackle the markets from having to use them. Otherwise I guarantee you all that what will happen is that sooner or later 100% all our pension funds might end up in AAA illiquid junk.
It was primarily an excessive confidence in the risk assessment done by the rating agencies that managed to catapult what should have remained a small local problem of badly awarded mortgages, into a global mass-confusion. And that excessive confidence sprang foremost out of the fact that our regulators, going against what all human wisdom should have taught them empowered the credit rating agencies to implicitly and explicitly to decide so much about where market should go.
The real truth we need to realize to face is that the better the credit rating agencies could get at what they are supposed to do truth is that the larger could be the build up of really dangerous systemic risks and therefore the bigger the ensuing explosion.
I am not against credit rating agencies. I will always use them. But please unshackle the markets from having to use them. Otherwise I guarantee you all that what will happen is that sooner or later 100% all our pension funds might end up in AAA illiquid junk.
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