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Isn't the S&P rating just an opinion? If I created a subscription-based restaurant newsletter that you relied on and subsequently got food poisoning, would you

by jbuzbee 14y ago

Isn't the S&P rating just an opinion? If I created a subscription-based restaurant newsletter that you relied on and subsequently got food poisoning, would you sue me or just cancel your subscription and tell all your friends that my ratings were garbage?

Permit 14y ago
Some opinions hold more weight than others. I'm not sure what the law is in the United States, but in Canada if an engineer gives poor, actionable advice in some field related to engineering he can be held liable for any damages related to that advice. A ratings agency is neither an engineering firm nor is it a food-review newsletter. I suppose it's the job of the courts to decide which of the two it more closely resembles and if its "opinions" can be protected by free speech laws.
- jbuzbee 14y ago
  My gut-feeling is that a S&P rating is somehow "official" and therefore the company is more responsible for mistakes, but I'm not sure why. If I stand up a popular web site and give my own ratings on stocks, bonds, etc, would I get sued if my ratings prove poor? Where would that lead us?
mdda 14y ago
Many banking and insurance regulation are based on the ratings of the securities held : So being a Nationally Recognized Rating Agency is a pretty critical role, and a ratings agency deserves to be held to a higher standard, IMHO. OTOH, perhaps the government should subsidize them, since they are performing work for the governments regulators, in effect.
- Agathos 14y ago
  They are essentially a government agency with a profit motive. This worked out as well as any reasonable person would have anticipated. The strange thing is, the government still hasn't stripped them of their quasi-regulatory powers.
yummyfajitas 14y ago
No. The three ratings agencies are legally privileged - an S&P AAA rating on a security allows a bank to use it to satisfy regulatory requirements (capitalization, etc).

by jbuzbee 14y ago

Permit 14y ago

Some opinions hold more weight than others. I'm not sure what the law is in the United States, but in Canada if an engineer gives poor, actionable advice in some field related to engineering he can be held liable for any damages related to that advice. A ratings agency is neither an engineering firm nor is it a food-review newsletter. I suppose it's the job of the courts to decide which of the two it more closely resembles and if its "opinions" can be protected by free speech laws.

jbuzbee 14y ago
My gut-feeling is that a S&P rating is somehow "official" and therefore the company is more responsible for mistakes, but I'm not sure why. If I stand up a popular web site and give my own ratings on stocks, bonds, etc, would I get sued if my ratings prove poor? Where would that lead us?

mdda 14y ago

Many banking and insurance regulation are based on the ratings of the securities held : So being a Nationally Recognized Rating Agency is a pretty critical role, and a ratings agency deserves to be held to a higher standard, IMHO. OTOH, perhaps the government should subsidize them, since they are performing work for the governments regulators, in effect.

Agathos 14y ago
They are essentially a government agency with a profit motive. This worked out as well as any reasonable person would have anticipated. The strange thing is, the government still hasn't stripped them of their quasi-regulatory powers.

yummyfajitas 14y ago

No. The three ratings agencies are legally privileged - an S&P AAA rating on a security allows a bank to use it to satisfy regulatory requirements (capitalization, etc).