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© 2015

Public Credit Rating Agencies

Increasing Capital Investment and Lending Stability in Volatile Markets

  • Authors
Book

Table of contents

  1. Front Matter
    Pages i-xiii
  2. Susan K. Schroeder
    Pages 1-7
  3. Susan K. Schroeder
    Pages 25-72
  4. Susan K. Schroeder
    Pages 73-104
  5. Susan K. Schroeder
    Pages 105-124
  6. Susan K. Schroeder
    Pages 125-159
  7. Susan K. Schroeder
    Pages 161-171
  8. Back Matter
    Pages 173-196

About this book

Introduction

In the aftermath of the Global Financial Crisis, there have been many criticisms weighed against private credit rating agencies. Many claim they only exacerbate financial market volatility by issuing faulty public statements, ratings warnings, and downgrades. This instability increases the uncertainty in business environments and weakens the pace of business investment. Their rating changes also prompt national governments to reduce their spending at a time when fiscal expenditures are crucial for economic recovery.

Public Credit Rating Agencies argues for the creation of national public credit rating agencies, offering the first in-depth discussion of their implied role and function operating alongside private agencies. Schroeder provides an up-to-date overview of the ratings industry and the government bodies that monitor its activities. She suggests that the proper implementation of public credit rating agencies will promote the stability of lending, further development and adaptation of new technology, and increase labor productivity and the profitability of new investment in businesses. Finally, this book clarifies the inconsistencies that have surfaced between public budgeting and a rating agency's evaluation of national budgets. 

Keywords

credit ratings rating agencies public credit Minsky regulating capital incremental rate default risk creditworthiness sovereign business business finance Credit Risk finance investment Rating

About the authors

Susan K. Schroeder is Lecturer at the Department of Political Economy at the University of Sydney, Australia. Her current areas of research are international financial crises, business cycles, and financial fragility and how these areas are linked to the country risk assessment. She has taught at universities in New York, USA; Bremen, Germany; and Auckland, New Zealand. Schroeder has been visiting scholar at SOAS, University of London, UK; the Mises Institute, USA; and Wolfson College, Cambridge University, UK, where she is a lifetime member.

Bibliographic information

Industry Sectors
Engineering
Finance, Business & Banking

Reviews

"The momentum of investment and financing decisions has become increasingly subject to the influence of credit rating agencies. Yet the differing methods they deploy to determine credit worthiness assessments, the variability in their determinations and, above all, the tendencies to overstate risk should prompt serious questions about the influence these agencies have in shaping the dynamics of contemporary capitalism. In this provocative study, Schroeder exposes the potentially damaging consequences of this privileged role. In mounting a powerful case for moderating the influence of credit rating agencies, Schroeder builds upon the heterodox economic tradition to advocate for the establishment of a public agency that would enhance the integrity of credit rating assessments and focus on delivering investment stability." Stuart Rosewarne, Associate Professor of Political Economy, University of Sydney, Australia

"Private security rating agencies are paid by firms wanting to sell securities; understandably they rate securities highly. In this thoughtful book, Susan Schroeder proposes public rating agencies as a policy solution. She argues cogently that this would eliminate conflicts of interest, provide investors with more useful information and help stabilize the economy." Steven Pressman, Professor of Economics and Finance, Monmouth University, USA