It is time to de-regulate the markets
Sir, Wolfgang Münchau in “Stability for the markets is just the start”, September 10 mentions that he is not so convinced of the need to regulate the credit rating agencies since “the smart investors have always known to treat AAA ratings with a pinch of salt”.
Whether the smart investor knows it or not, which also begs the question whether we have a way to divide the financial market into smart and dumb, has nothing to do with the problem. Münchau would do well to read the role of the credit rating agencies in for example the Minimum Capital Requirements by the Basel Committee on Banking Supervision to get a fuller understanding of how much power these First Amendment protected opinion makers really have. Also, although the midst of a crisis might not be the best moment to speak about it, let us not also forget all those who are in real terms hurt by not being more favourably rated. Therefore although I agree completely with Münchau in that we do not need to regulate the credit rating agencies, we absolutely need to de-regulate the financial markets from having to use them.
In Spain there is a saying that goes “We were many and then granny gave birth” and in this respect I feel there are far sufficient forces in the world to drive the financial flows up the mountains towards the same cliffs, so as for they to be further herded on by the credit-rating-boys.
Whether the smart investor knows it or not, which also begs the question whether we have a way to divide the financial market into smart and dumb, has nothing to do with the problem. Münchau would do well to read the role of the credit rating agencies in for example the Minimum Capital Requirements by the Basel Committee on Banking Supervision to get a fuller understanding of how much power these First Amendment protected opinion makers really have. Also, although the midst of a crisis might not be the best moment to speak about it, let us not also forget all those who are in real terms hurt by not being more favourably rated. Therefore although I agree completely with Münchau in that we do not need to regulate the credit rating agencies, we absolutely need to de-regulate the financial markets from having to use them.
In Spain there is a saying that goes “We were many and then granny gave birth” and in this respect I feel there are far sufficient forces in the world to drive the financial flows up the mountains towards the same cliffs, so as for they to be further herded on by the credit-rating-boys.
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