''Chinese, US, Russian firms to set up ratings agency''

From Straits Times

''Chinese ratings agency Dagong said on Tuesday it was tying up with US and Russian partners to form a new "independent" group to rival US-based agencies it claims have "proven inadequate".

The Chinese firm will set up the joint venture with Egan-Jones Ratings Co. (EJR), based in Pennsylvania, and Russia's RusRating JSC, it said in an invitation for a press conference on Wednesday to unveil the new company.''

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''BRICS struggle to create their own risk assessment agency''

From RBTH via Stratrisks

''Economists from Argentina, Brazil, and Russia have begun evaluating the possibility of creating their own risk assessment agency to analyze economic development in emerging economies, such as those that make up BRICS: Brazil, Russia, China, India, and South Africa.

Over the course of several informal meetings representatives discussed the systematization of data and statistics collected by BRICS countries. The consortium is currently one of the biggest movers and shakers in the global economy. At the G-20 summit that was recently convened in Los Cabos, Mexico, BRICS representatives proposed a new strategy for global economic development in which member countries would lead changes aimed at restructuring the international financial system.''

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''Moody's and S&P set to face US fraud claim over ratings''

it's about time...................From The National.ae

''Moody's Investors Service and Standard & Poor's are to face fraud allegations that they assigned inflated ratings to notes sold to investors, a federal court judge in the United States has ruled.''

''A case brought by investors including Abu Dhabi Commercial Bank (ADCB) in 2008 alleged negligent representation and breach of fiduciary duty on the part of Morgan Stanley, which originally structured the deal.''

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Chris Whalen: "Moody's Bank Downgrade: Too Little, Too Late"

From ZeroHedge

''So what does the ratings downgrade mean?  First, it means that counterparties of the major banks are going to be forced to begin pricing ratings risk into their credit limits for these institutions.  For MS and GS in particular, the ratings downgrade is a major hit because these broker-dealers are not banks, lacking the funding base to survive a major period of liquidity stress.

The second and related issues is that Buy Side counterparties will now start to curtail business with MS and GS, again because they are not banks.''

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Zero Hedge: ''Moody's Downgrades 26 Italian Banks''

From Zero Hedge

''Moody's Investors Service has today downgraded by one to four notches the long-term debt and deposit ratings for 26 Italian banks, including five banks that are part of larger groups. In almost all cases, the rating actions reflect concurrent downgrades of these banks' standalone credit assessments, rather than changes in Moody's assumptions about levels of third party support, including Government support.''

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''Moody's may cut ratings of 17 global and 114 European financial institutions''

"Among the banks that might be downgraded by two notches are Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, HSBC Holdings and Goldman Sachs.

Bank of America and Nomura were included in those that might be downgraded by one notch."

from the telegraph...

''S&P may cut G20 nations as of 2015 on health costs''

"Steadily rising health-care spending will pull heavily on public purse strings in the coming decades," S&P analyst Marko Mrsnik wrote in the report. "If governments do not change their social protection systems, they will likely become unsustainable."


from reuters...

''ECB's €489bn will 'buy valuable time' but is no eurozone debt bazooka''

read more........from the telegraph........

"Amid a fresh raft of poor eurozone economic data, Scott Bugie, head of S&P's financial institutions division doused the key cause for pre-Christmas optimism. Although he agreed Wednesday's long-term refinancing operation was a "big deal", Mr Bugie told Reuters: "It is not solving the fundamental issues though... It's kicking the can a long way down the road rather than just a little bit, but in the end it is still kicking the big old can down the road."

He said the action did not "change the fundamental picture but it does buy valuable time". He added: "The move in itself will not lead to any improvement in (banks') credit ratings."

David Stockman: 'Another U.S. Debt Downgrade May Be 'Question of When'

from dec 6 2011......

Russian Debt Ceiling: "Debt Will Increase to $400Bln by 2014"

from moscow times........

"The government approved the state debt policy for the next three years on Thursday, with a plan to increase the size of the state debt to 12 trillion rubles ($400 billion) by 2014 and work toward improving the country's credit rating.

The current debt stands at 4.6 trillion rubles.

The policy drafted by the Finance Ministry earlier this week, was discussed at a Presidium meeting chaired by Prime MinisterVladimir Putin.

According to the document, the government will seek to maintain "the high level of Russia's credit ratings" and create "a base for increasing the ratings to A."

The policy document states that the country, which is rated BBB with a stable outlook by Standard & Poor's, BBB with a positive outlook by Fitch, and Baa1 with a stable outlook by Moody's, is "clearly underrated," because it has a low level of state debt  compared with most developed and developing countries".............READ MORE

'Washington-area municipalities sweat out federal ratings downgrade'

from wapo........

"Local government officials are struggling to gauge the impact of the Standard & Poor’s unprecedented downgrade of federal credit even as Washington watches global reaction to its latest financial setback.

Will the ratings agency downgrade counties and states? Will the federal government’s predicament cost local taxpayers? And can local governments have better credit than the federal government?

“We are in uncharted territory,” Prince William County Board Chairman Corey A. Stewart (R) said. “No one knows what the ultimate long-term ramifications are. . . .But we know they’re going to be significant.”

Word of the S & P downgrade Friday shook local municipalities, many of which had justweathered the scrutiny of another rating agency, Moody’s Investors Service. Moody’s, concerned about the chaos surrounding the federal debt ceiling, had been reviewing the ratings of the federal government and municipalities with close ties to Washington".................READ MORE

'Communist China tells US "good old days" of borrowing are over'

from reuters.........

* China renews call for another global reserve currency

* G7 major powers to confer on markets crisis - source

* Obama says let's work together

"China bluntly criticised the United States on Saturday one day after the superpower's credit rating was downgraded, saying the "good old days" of borrowing were over.

Standard & Poor's cut the U.S. long-term credit rating from top-tier AAA by a notch to AA-plus on Friday over concerns about the nation's budget deficits and climbing debt burden.

China -- the United States' biggest creditor -- said Washington only had itself to blame for its plight and called for a new stable global reservecurrency.

"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone," China's official Xinhua news agency said in a commentary".............READ MORE

'Russia retains confidence in US dollar'

from voice of russia.......

"Russia has no plans to scale down its sovereign investment in assets that are nominated in US dollars.

Deputy Finance Minister Sergei Storchak was speaking about this in Moscow Saturday after Standard & Poor’s downgraded its rating of America’s national debt from the maximum AAA level to AA+. Mr Storchak described this reduction as insignificant and without long-term consequences for financial markets. 

Russia keeps 45 percent of its sovereign wealth funds in US dollars, 45 percent, in euros, and 10 percent, in British pounds"................LINK

'US credit rating downgrade prompts warning from Communist China'-China calls for new reserve currency

from the guardian..........

"China, the world's largest holder of US debt, condemned the "short-sighted" political wrangling in the US and said the world needed a new and stable global reserve currency.

In a comment article the official Xinhua news agency said China had "every right now to demand the United States address its structural debt problems and ensure the safety of China's dollar assets. International supervision over the issue of US dollars should be introduced and a new, stable and secured global reserve currency may also be an option to avert a catastrophe caused by any single country."

S&P had held back cutting the rating earlier on Friday after the US government reportedly questioned its maths. But the agency insisted it was going ahead with the downgrade to AA-plus, saying the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilise the debt situation.

It is the first time S&P has issued a "negative" outlook on the US government since it began rating the credit-worthiness of railroad bonds in 1860. Michael Hewson, a market analyst at CMC Markets, warned: "This crisis will run and run, and could make Lehmans look like a Tupperware party."

'The U.S. is downgraded. Now what?'

from wapo...........

"S&P announced that it downgraded the U.S. debt from AAA to AA+ tonight. Commentators are split as to whether this would have major negative consequences for both the US and world economy, or whether it would be basically meaningless. Here’s the case for each position.

Why It Might Matter: If the US debt gets downgraded, many other debt instruments will likely get downgraded as well. When Moody’s put US debt on review for downgrade during the debt ceiling standoff, if also put on notice 7,000 other bonds, worth a total of $130 billion, that rely directly on revenue from federal government payments, such as certain kinds of municipal bonds. Bonds that are indirectly dependent on the federal government, such as those issued by hospitals that receive Medicare payments, or defense firms reliant on Pentagon contracts, could get downgraded as well. In addition, many everyday interest rates - such as those for mortgages, car loans, and credit cards - are pegged to US Treasuries, meaning that if a downgrade forces up interest rates on US debt (which is likely, but will depend on how the markets react) interest rates for those will shoot up as well. This would raise the cost of borrowing across the system, depressing the economy.

It would also lead to widespread uncertainty. As the Post’s Ezra Klein wrote the debt ceiling standoff threatened to force a downgrade, “The cornerstone of the global financial economy is the idea that Treasuries are risk-free.” A downgrade would mean Treasuries are no longer risk-free, and thus shake up the whole system. The last time AAA debt lost its luster in such a dramatic fashion was 2008, when AAA-rated subprime securities were discovered not to be sound. The result was the current financial crisis.

Additionally, many institutional investors - such as pension or money market funds - are required to hold a certain amount of AAA debt, meaning that some might be forced to sell off US debt in the event of a downgrade. Given that money market funds hold about $338 billion in US debt, or almost half of short-term holdings, this would be an enormous selloff, which would raise interest rates still higher and greatly amplify the economic damage incurred due to a downgrade.

Why It Might Not: Ratings are generally used as a proxy to determine the financial health of entities that investors may not know much about. But everyone knows about the health of the US government, and now that the debt ceiling debate has passed no one thinks it is going to default any time soon. Thus, investors that might normally be inclined to not buy or keep AA rated debt could make an exception for US Treasuries. Indeed, some pension and money market funds have considered loosening their rules around debt ratings to allow higher holdings of US debt in the event of a downgrade. Further, AA is still a very high rating. AA firms have statistically identical performance to AAA ones, according to the Fitch rating agency. Just this past January, S&P downgraded Japan’s debt from AA- to AA, and markets more or less didn’t care.

Bottom line: The US has never been in this situation before, so it is hard to see who is correct. When, in April, S&P declared the long-term outlook on US debt to be negative, it was the first time it had done so since Pearl Harbor. Moody’s has rated US debt as AAA since the firm started conducting ratings in 1917. There is simply no modern precedent for a US downgrade"....................LINK

'S&P cuts U.S. credit rating to AA-plus'

its official............from chicago tribune.....

"The United States lost its top-notch AAA credit rating from Standard & Poor's on Friday, in a dramatic reversal of fortune for the world's largest economy.

S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits.

U.S. Treasuries, once undisputedly seen as the safest investment in the world, are now rated lower than bonds issued by countries such as the UK, Germany, France or Canada.

The outlook on the new U.S. credit rating is negative, S&P said in a statement, a sign that another downgrade is possible in the next 12 to 18 months".............LINK

'Ratings imperialism'

from blogs.hindustantimes.........

"Much of the world’s financial standards, procedures and so on were set by the City of London during the heyday of the British Empire. More than anything else, what distinguished the British Empire from the other imperiums was the efficiency of its capital markets. This rules-making power was passed on to the US after the world wars.

With the world beginning another power shift, countries like China want to get into the rules-making business. In fact, Chinese officials like to say that the ultimate measure of national power is when a country becomes a rules-maker for the rest of the world.

While the US doesn’t own or control the rating agencies, they have arisen and function in a New York financial milieu. The Europeans, until now, left the agencies’ regulation to the US’s Securities and Exchange Commission. But Europe’s actions are really evidence of declining power. Acts of frustration rather than influence.

The more interesting development has been the establishment of China’s own rating agencies. Three of them are affiliated to the big three US firms, but the fourth one, Dagong, is all-Chinese. Dagong got into the sovereign debt rating business only recently – and it isn’t taken too seriously. But it has symbolically been downgrading US government debt to the point that not merely Chinese government sovereign ratings are higher, but so are some Chinese local governments (though how the present revelations of oceans of red ink hidden in local Chinese government account books has changed this is unknown). Laughable perhaps. But think: if the West gets roiled again, the US economy goes in to free fall, Dagong will look prophetic. And that is how reputations are first established"...............READ MORE