S&P should stand for scare and provoke

Badly burned for not warning investors about the last market crash, Standard & Poor's has done everything in its power to assure it's at the forefront of this one. And, that includes igniting the flame to set it off.
I'm not a market watcher, but I do know a little about image and reputation. And, it's crystal clear to me that, despite a $2 trillion miscalculation in its math this past Friday, S&P decided to go ahead and issue its ratings downgrade anyway. They did so citing political polarization as their rationale  . But, that's pure posturing on their part. S&P knows as much about politics as this blogger knows about nuclear fission.

It was image and reputation repair that drove their reckless decision. Now, as a result, they've got an even bigger image and reputation problem than ever.

Back in 2008, S&P was asleep at the wheel. In 2011, they were responsible for stepping on the pedal and accelerating to 120 mph around a hair-pin turn.

Long after the market recovers and the economy improves, S&P will be remembered for botching two separate crises. In fact, if I were writing a book about the first, I'd borrow a page from Jack Kennedy's inaugural tome and entitle it, 'Why Standard & Poor's Slept.' As for the second, I'd opt for 'Why Standard & Poor's scared and provoked.'

BTW, S&P also has a very good shot at becoming synonymous with the term 'knee-jerk reaction'. Someone within that organization was hell bent on downgrading the country's rating. And he (or she) wasn't going to let a little thing like facts get in the way.

So, I ask you dear reader, what's worse: fiddling while Rome burned in 2008 or lighting the torch that set it ablaze in 2011?

And a tip o' the hat to Edward M. Ted "The Bastard" Birkhahn for this idea.

5 thoughts on “S&P should stand for scare and provoke

  1. I have to believe S&P will one day be right alongside BP and Enron in text books about worst practices in crisis management.

  2. Credit ratings agencies also managed to avoid being subject to new regulations under Dodd-Frank. So essentially, there are no mechanisms to ensure that these entities are unbiased, do proper diligence, are competent etc.

  3. They did accomplish something: spreading panic and fear. It was a great day for speculators. They love S&P. But otherwise, the company’s tainted and has been for awhile.
    Here’s the irony: Treasury bond sales went up. Compared to stocks and Europe, the USA is still the safest place to park money safely. Although given how badly mangled our government is at managing the economy and the White House’s fear of taking a stand, who knows how long that will last?