S&P Notices Something Wrong with Europe

An exclusive interview with fictitious Standard and Poor's representative Hank Terwilliger.

____

In a stunning move today, Standard and Poor's put almost every Eurozone country on alert for a credit downgrade, prompted by a "belief that systemic stresses in the Eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the Eurozone as a whole."

Standard and Poor's representative Hank Terwilliger explains what led to this decision.

"I was walking down Wall Street," says Hank, "and I heard all these people talking about Europe and about some kind of credit crisis over there.  Then I saw stories about it on the front pages of newspapers as I was walking to the convenience store.  I thought, 'what happened?  How could we have missed this?'   I immediately went back to the office and told my boss we should downgrade Europe."

Hank's superiors didn't believe his wild story at first, but after Hank showed them endless Internet stories about it from the previous weeks, they became convinced.  "My boss looked at me and said, 'F**k it.  We downgraded the banks last week.  Let's just downgrade the whole damn continent!'  So we did."

"Our job at Standard and Poor's" explains Hank, "is to tell you what you already think, and make a big deal of it."  After a moment's hesitation, he added, "And we don't even have to be right."

Hank clearly loves the power and prestige his useless job wields.

____


"The agency's decision is uncontroversial."

Robert Preston, BBC, regarding Standard and Poor's downgrade alert for Europe.

____

The S&P Bank Downgrade

Today, just a day after I wrote an article supporting the purchase of US banks (see below), Standard and Poor's downgraded several of America's largest financial institutions, including Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo.

At first I was taken aback by the move, and even - just for a minute - slightly concerned.  Standard and Poor's said it had changed its ratings system ("with new criteria") for banks, resulting in the sweeping downgrades.

I thought, "Standard and Poor's changed its rating system, and downgraded the US banks?  What if their ratings system is actually correct now?  That's not good."

Then I read that Standard and Poor's had actually upgraded its rating for the crappy China Construction Bank - an overextended lender in a grossly overpriced market.  My concerns melted away.

Generic formulas still can't rate risk.

____


"If merely looking up forward financial data would tell you what the future holds, the Forbes 400 [richest people list] would consist of librarians."

Warren Buffett

____


See also:
Forget Greece and Italy


____