Yesterday, Jean-Claude Trichet, president of the European Central Bank (ECB), spoke out against the ratings agencies. Moody?s severely lowered Portugal?s credit rating on Tuesday. He was not the first to take a stand.
The following people also spoke out against the agencies: European Commission president, José Manuel Durao Barroso; the European Commissioner for Financial and Economic Affairs, Olli Rehn; and Germany?s secretary of finance, Wolfgang Schäuble. These individuals launched a direct and synchronized attack against the ratings agencies on Wednesday.
Trichet announced that the BCE could continue accepting Portuguese national debt as financing collateral regardless of the country´s credit rating. This decision, adopted by Greece in May of 2010, signifies a breath of air for Portugal. The reason? Banks could continue offering Portuguese bonds as guarantees for getting financing through the BCE´s approval methods. If Portuguese debt were to lose this quality, for example, the financial firms would have to stop buying it and sell what they currently own ? with all the damage that would entail.
Trichet has not beat around the bush. He scorned the agencies for publishing fair-weather ratings, because this exaggerates prevailing market conditions ? whether euphoria in good times or pessimism in bad times.
"Their work is not optimal," he said. Nor did he hesitate to affirm that they are working like an oligopoly, something that is not a desired state of affairs. Although later he conceded that resolving problems in the agencies is difficult, his position remained staunch and clear.
Translated and Edited in English by Brandon Dyches and Jose L. De Haro
