Just because they are private doesn’t make the credit rating agents less bureaucrats

Sir John Authers in “The Short View” of May 2 asks the relevant long term question “should the S&P’s ratings be this important”, and answers with a no “As we have learnt from the credit crisis, it is dangerous for so many to put so much weight on one rating agency’s judgment”. He is right. The fact is though that as long as the regulators keep empowering these agencies to decide so much on how much capital the banks have to set aside for each credit based on the ratings, too many will indeed put too much weight on one rating agency’s rating, and there is no way around it.

I just ask what if those credit rating agents had worked for the regulators. All hell would have broken loose. Our confusion arises from not being able to see through the veil that the outsourcing to the private sector signifies, so as to comprehend that the credit rating agents are just simple credit-risk-measuring-bureaucrat-commissars.