Michel Barnier: Yet more French ignorant twattery over economics and markets

Companies will have to rotate the credit-rating firm they use every three years, with a four-year \”cooling off\” period. There will also be constraints on the ability and the type of advisory work that credit rating firms are allowed to provide. As well as forcing agencies to disclose the models, methodologies and key assumptions on which they base their ratings, with annual transparency reports.

Cretins, cretins.

If you know what the ratings model is then you can game your offering to fit the ratings model.

Umm, as half of Wall Street did with MBS and CDOs. The man is just entirely a loon.

Rating agencies will be liable for their decisions, potentially sparking expensive lawsuits in civil courts.

How? A rating is an opinion: how can you be legally liable for an opinion?

12 comments on “Michel Barnier: Yet more French ignorant twattery over economics and markets

  1. Well, if say S&P are contracted to provide a rating on something, and turn out to be very wrong, I would like to be able to sue them for their opinion: provided I’m the guy with the contractual relationship. But if there’s no contract….

  2. From the linked article:

    “However, the outspoken commissioner was forced to concede on his controversial proposals to introduce a temporary ban on sovereign debt ratings under bailout circumstances”

    What is this ban supposed to achieve if it doesn’t kick in until a sovereign is already officially bust? It’s government might claim to have solved the problem a bit earlier without the ratings agencies able to comment, but as soon as they do the ban is lifted, presumably…

  3. As Rupert Fiennes so neatly puts it……if there’s no contract….

    Based on this logic, could we sue all politicians and columnists who claimed a decade ago that the Euro was a good idea?

  4. That’s nuts. A rating is only really a Bayesian probability: how likely, given the information I have available, do I think it is that a certain bond issuer will default? And it’s not even a number: it’s only a categorisation.

    So how would you test it? Perhaps by asking whether AAA-rated issuers default less frequently than C-rated issuers. But given that a sequence of downgrades normally comes before any default, that’s (nearly) always going to be true.

  5. So how would you test it?

    Monitoring the grading of subsequently defaulting issuers through time?

    IMO, the question isn’t “is it an opinion” but “is it a competently and honestly derived opinion”? There have been cases where one or both of those criteria have been in doubt.

  6. SE has it (#5). Nothing wrong with being able to sue over whether an opinion was competently and honestly arrived at.

    Getting evidence can be a bit of a sod, but one of the purposes of the courts is to sift evidence.

  7. Richard

    Crap–an opinion is just that. Honest/competant is what they are selling in the marketplace. If they are trusted in the markets who are political/bureautwatic filth to demand accountings.

    Also, I don’t like your opinion and I

  8. I agree with Mr Ecks. I’d like to see the advocates of this policy show that their opinions are honest and competent through the courts. (Without me paying anything.)

  9. am cut off in mid rant?

    But I agree with you and Richard – you probably should have a contractual relationship before you are able to sue for an incompetent or dishonest opinion.

    However, I suspect there are also levels of incompetence where tortious negligence (vicarious or otherwise) could replace the requirement for contract with ‘duty of care’ and dishonesty where criminal prosecution for fraud might supplement any civil action.

  10. If one could be legally liable for an opinion, couldn’t Vodafone sue Murphy for his tax owed nonsense?

  11. Whatever rating agencies say it you are responsible for doing your own DD. Unless they have been criminally negligent or deliberately and knowingly set out to deceive I can’t see anyone getting away with suing them.

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