The SEC issued its annual report on credit rating agencies last month. And it's not good. It does not seem as though the agencies have changed their way of working very much. For example, the report says that two of the larger companies “failed to adhere to their ratings policies and procedures, methodologies, or criteria, or to properly apply quantitative models.”
We all make mistakes, but the agencies don't tell anyone about theirs or their implications. And then some agencies outright lie. They do not accurately describe the methodology used to determine some of its official grades. Statements made in rating publications directly contradict internal rating records. Management has a say in the final rating, sometimes it is to change the original rating by the staff. Of course, is there anything wrong when the agency gives an unsolicited rating to an issuer?
The agencies really helped create the Great Depression. It looks like they are trying to repeat.
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