{"id":432,"date":"2010-06-03T09:22:00","date_gmt":"2010-06-03T13:22:00","guid":{"rendered":"http:\/\/www.intuitiveinvestor.com\/web\/?p=432"},"modified":"2018-08-18T17:53:39","modified_gmt":"2018-08-18T21:53:39","slug":"credit-ratings-agency-scrutiny-by-the-eu","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2010\/06\/03\/credit-ratings-agency-scrutiny-by-the-eu\/","title":{"rendered":"Credit ratings agency scrutiny by the EU"},"content":{"rendered":"

Yesterday the European Commission announced the creation of the European Securities and Markets Authority (ESMA).\u00a0 The Authority will be charged with both the regulation of, and monitoring of, credit ratings agencies.\u00a0 As stated now ESMA would come into being next year.\u00a0 The creation of this new European regulatory agency comes in the midst of a firestorm of criticism of the major credit ratings agencies, Moody’s, Standard & Poors<\/span>, and Fitch, which are all U.S. businesses.\u00a0 The thinking by Europe is that these U.S. institutions and their credit downgrades of the sovereign debt of EU members has precipitated the continent-wide financial crisis.<\/span><\/p>\n

I think this is a bunch of bull.\u00a0 While I feel that the credit ratings agencies do issue biased ratings, often do not anticipate credit problems of debt issuers, and are slow to respond to economic changes, I also feel that more independence would aid them.\u00a0 I also feel that what has precipitated the European financial crisis is profligate debt spending by EU member nations that can’t adhere to their self-imposed budgets except through lying.\u00a0 Not only that, but the EU’s<\/span> economic policies, including lots of\u00a0entitlement-based institutions, have led to an entire continent of nations unable to compete in an unforgiving capitalist environment.\u00a0 So basically the EU’s<\/span> creation of ESMA is a variation on a popular European theme: When in doubt, blame the United States.<\/span><\/p>\n

I do feel, however, that in the short run additional scrutiny of the major credit ratings agencies is a good thing.\u00a0 Why?\u00a0 It will hopefully provide the inducement to get them to become better and more reliable at what they do.\u00a0 In particular, the agencies should begin to address the three issues I outlined above.\u00a0 In my opinion, lax U.S.\u00a0regulation of financial markets and of credit ratings agencies are primary causes of the 2008 and 2009 recession.\u00a0 So that the credit ratings agencies are accountable not only to U.S., but also European, regulators is a fantastic thing.\u00a0 This is possible because the U.S. ratings agencies operate in Europe, therefore fall under European jurisdiction.\u00a0 It remains to be seen if the ESMA is just a bit of politically expedient rhetoric meant to placate a disgruntled, U.S.-bashing, European public.\u00a0 Teeth need to follow up the bark.<\/span><\/p>\n

In the long-run, Europe needs more than rhetoric to fix its fundamental structural economic problems, and ESMA is, in my opinion, not a part of that solution.<\/span><\/p>\n

Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Yesterday the European Commission announced the creation of the European Securities and Markets Authority (ESMA).\u00a0 The Authority will be charged with both the regulation of, and monitoring of, credit ratings agencies.\u00a0 As stated now ESMA would come into being next year.\u00a0 The creation of this new European regulatory agency comes in the midst of a […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-432","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/432","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=432"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/432\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=432"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=432"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=432"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}