Ratings companies, whose scores have helped determine the costof money for governments and businesses for more than a century,are no longer trusted by the world's biggest investors, accordingto the former head of structured finance at Standard &Poor's.

“They're there because people have to have them, not becausepeople believe in them,” David Jacob, who was fired from S&P inDecember, said in an interview at Bloomberg headquarters in NewYork. “Maybe retail investors do, that's the unfortunate part, butI think institutional investors don't.”

After helping ignite the worst financial crisis since the GreatDepression by inflating grades on securities backed by subprimemortgages, the ratings firms' reputations are being diminishedfurther in the bond market. When S&P downgraded the U.S.government in August, Treasury yields fell to record lows, and thecost of protecting financial debt declined following last month'sdowngrades of 15 global investment banks by Moody's InvestorsService.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.