The extraordinary thing about the loss of our ‘cherished’ AAA credit rating is not that the Chancellor hitched his economic credibility to it in the first place. Actually, that is fairly incredible but it isn’t the most incredible.
Neither is the most incredible thing the fact that acres and acres of newsprint have been devoted to this ‘disaster’. Nor is it the fact that almost everybody (including Ed Balls), quietly agrees that it is not going to make a blind bit of difference to our ability to raise money in the capital markets.
No, the most incredible thing is that anybody is even remotely listening to Moody’s in the first place or for that matter their competitors namely Standards & Poors and Fitch’s.
In fact, when I heard that the AAA rating had been removed I laughed!
Why? Because the main culprits for the financial meltdown in 2008 are as follows. Firstly the global investment banks who played Russian roulette with the weapons of mass destruction now known as CDOs (credit default obligations).
Secondly, the major accountancy firms who declared the investment banks to be solvent, despite the fact that they had no way of knowing the potential liabilities of banks holding the CDOs.
Thirdly, the politicians who with a combination of either light touch regulation or total disregard for regulatory norms let the banks run amok.
Finally, the credit ratings agencies who gave credibility to the slicing, dicing and securitisation of dodgy mortgages in what became known as the mezzanine CDO market by giving them AAA ratings despite not having a clue what was in them.
In fact, by all accounts the conversations between the ratings agencies and the banks went something like this.
Banker: “You know that stack of securitised mortgages you gave AAA ratings to a few months ago?”
Ratings agency: “Yeah”
Banker: “This one’s exactly the same”
Ratings agency: “OK then, you can have another AAA.”
No research, no questions, just throwing AAA ratings around like confetti.
The fact that these same people now pass judgement on the British economy is risible to say the least.