After S&P cut its credit outlook on the UK last week, we noted that listening to the ratings agencies is like making investment decisions based on last month's newspaper. In this weekend's Wall Street Journal interview, Dallas Fed President Richard Fisher seemed to agree with that sentiment:
"I served on corporate boards. The way rating agencies worked is that they were paid by the people they rated. I saw that from the inside." He says he also saw this "inherent conflict of interest" as a fund manager. "I never paid attention to the rating agencies. If you relied on them you got . . . you know," he says, sparing me the gory details. "You did your own analysis. What is clear is that rating agencies always change something after it is obvious to everyone else. That's why we never relied on them."
If the US ever loses its AAA credit rating, does anyone really think the ratings agencies will be ahead of the curve?
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