The Department of Justice will have a tough time proving that Standard and Poors “inflated” its bond ratings.

The US Department of Justice has launched a civil law suit against the rating agency Standard & Poors, alleging “S&P issued inflated ratings that misrepresented the securities’ true credit risks” and that “S&P falsely represented that its ratings were objective, independent, and uninfluenced by S&P’s relationships with investment banks when, in actuality, S&P’s desire for [...]

Why you cannot measure risk

In 2008, Collateralized Debt Obligations (CDO) that had been given very high ratings by the credit rating agencies collapsed. The rating agencies got blamed for faulty ratings. Once a mining association gave a coal mine the “Safest Mine Award.” One month later the mine blew up and killed 32 miners. The award is based on [...]

Can China’s credit rating agency do a better job than its rivals?

An AAA rating is not “wrong” because the security later defaults.