The recent downgrade of the U.S. government’s credit rating by the Standard & Poor’s agency has put this private company and its major rivals in the headlines.
Rating agencies are supposed to help investors by evaluating the creditworthiness of nations and companies that borrow money.
The highest ratings are given to those judged to be most likely to repay lenders, and do it on time and in full. S&P rates such investments AAA. U.S. debt was cut one level to AA+ which is still a strong rating. S&P rates Greece, which has been having serious problems with debt issues, CC.
The other well-known rating companies are Fitch and Moody’s, which have warned Washington to do a better job of managing its finances, but nevertheless still give a top rating to U.S. debt.
Moody’s has $2 billion in annual revenue, employs 4,500 people and has offices in 26 nations. Fitch has offices in 51 nations and operates globally. Standard & Poor’s has a tradition going back 150 years, and has offices in 23 nations.
In the past, credit rating agencies have been criticized for badly mis-judging the risk and value of complex investments in the U.S. housing market that later collapsed and helped spark the 2008 financial crisis.
Here are some places you can get more information about ratings and the agencies that produce them.
This is a link to the Guardian newspaper website, which has compiled ratings from all three companies for well over 100 nations:
http://www.guardian.co.uk/news/datablog/2010/apr/30/credit-ratings-country-fitch-moodys-standard
Standard & Poor’s website is here:
http://www.standardandpoors.com/home/en/us
At this page on the S&P website, company officials discuss why they cut the U.S. rating, and explain how they go about evaluating the risk that investors face:
http://www.understandingratings.com/
Moody’s Investor Services can be viewed at this address:
http://www.moodys.com/
Fitch can be viewed at this address:
http://www.fitchratings.com/index_fitchratings.cfm
Here are articles about rating agencies by a non-profit news company called Propublica:
http://www.propublica.org/blog/item/what-does-the-sp-downgrade-mean-if-france-is-rated-higher-than-the-u.s?utm_source=socmed&utm_medium=twitter&utm_content=2&utm_campaign=s%26p
Here is a VOA story about credit rating agencies:
