The three principal rating agencies in the world,
Standard & Poor’s, Moody’s and Fitch, are well known. But
another one has garnered some attention recently... how ?
By having more insight, or less fear, than the others. It has downgraded the
United States one month before S & P, France before others, and Germany,
the last AAA of this historic trio : we’re
talking about Egan Jones.
Newcomer’s arrogance or publicity stunt ? Perhaps. Crime of lèse-majesté
? For sure. This is how one should understand what just happened to
it. The punishment is quite severe : the Securities
and Exchange Commission (SEC) has forbidden Egan Jones to publish its rating
notes on States for 18 months (SEC’s
announcement), a stupefying decision.
The Dodd-Franck rulings had called for the SEC to
encourage the existence of more independent rating agencies in order to
reinforce competition. Let’s recall to that effect that the rating
agencies had given a AAA rating to the subprime
loans right up to when the market collapsed, so they bear a part of the
responsibility in the crisis. The SEC is actually doing a u-turn
The reasons given by the SEC are grotesque. Egan Jones
is accused of not following some rules of homologation, to avoid conflicts of
interest; a bureaucrat found some badly filled form. But let’s go to
the root of the problem : Egan Jones does not charge
the States for its services, it does so graciously, contrary to the three
others. They are the ones swimming in a sea of conflicts of interest !
This decision, which is a first, reveals something much
more dire. When the three top agencies were
finger-pointed following the subprime crisis, they explained that their
ratings were in fact opinions and, as such, protected by the first amendment
of the American constitution guaranteeing freedom of speech. It seems that
Egan Jones does not benefit from it.
Doesn’t forbidding Egan Jones to publish its
notes on sovereign debts equate to a limitation of its freedom of speech ? Will a bank or an analyst be punished the same
way tomorrow ? Will they censor a TV station or a
newspaper on this subject ?
The bread and butter of Egan Jones is
its businesses ratings, but the impact of this decision in terms of image and
visibility will be significant. And it will serve as a warning to any
newcomer in this business. Crony capitalism, encompassing now regulating
organisms such as the SEC, just went one step further by challenging a