If people did not already know about rating companies like Standards and Poor they will for sure know about them when this crisis ends at some point. The two rating companies are the ones that de-facto decide financial politics in the EU and their influence grows by the days goes by.
We would like to think that it is the democratic elected national governments that take decisions on behalf of their citizens or at least it is the quazi-democratic institutions in the EU that does. But as things stand now there is much doubt about whose hand is really guiding the decision-making process.
If you take standards and Poor who have put all the Euro countries on the “watch” list and by that have initiated a increase in rates on loans that they have to pay you make some interesting findings. Firsts of all is Standards and Poor owned by McGraw-Hill a company that is a listed company on the NY stock exchange. You might know the company from its publishing activities but it is also involved in construction and the subsidiary Platts that is a leading global provider of energy, petrochemicals and metals information, and a premier source of benchmark price assessments for those commodity markets. The major investors in McGraw-Hill and thereby the stakeholders who decides the direction for the decisions that the company makes is and interesting group.
The largest investor in S&P is Capital World Investors, which is chaired by James F. Rothenberg. He is a major player in the capital markets according to Muckety (a site that maps influence) he scores 95 out of 100 on the influence scale, which put him quite high on the scale. One of his major connections is with the US RAND Corporation that is a think tank controlled by the US government and has major ties to the US military and health sectors.
The VANGUARD GROUP, INC. is a privately held investment fund that was build by John C. Bogle. Mr. Bogle has been a critic of the practices in the mutual funds industry and has among other things made a comparison between US capitalism and the fall of Rome.
The STATE STREET CORPORATION has close ties with the Bailout – Money Market Mutual Fund Liquidity that is the fund that helped US banks through the financial crisis in 2008 to 2010. The fund ensured that Citybank, Citygroup, JP Morgan Chase and the state street corporation was kept afloat.
I will not be standing in the queue that shouts conspiracy but it makes more sense when one need to understand the decision making process the S&P is going through when one knows how these decisions are made. In my mind is McGraw-hill and its owners protecting their interests in Europe and the most effective way to do this is through the S&P rating system.
- McGraw-Hill Says, Who Needs Activists? (blogs.wsj.com)