Having crossed the feds already, the plucky rating agency Egan-Jones is going all in… and joining up with the Chinese and the Russians.
Egan-Jones is the lone rating agency that’s paid by the buyers of the securities it rates — unlike S&P, Moody’s and Fitch, who are paid by the issuers. Or as author William D. Cohan wrote at Bloomberg recently, Egan-Jones is “the one rating firm not on Wall Street’s take.”
Thus did Egan-Jones downgrade U.S. Treasury debt last year weeks before S&P.
Readers with keen memories will recall Egan-Jones was rewarded earlier this year for its ethical business model and forthright opinions… with a Securities and Exchange Commission investigation. It is ongoing.
One of the SEC’s main complaints is that Egan-Jones appears understaffed.
The firm is proceeding to address that concern… by launching a joint venture with the Chinese rating agency Dagong and Russia’s RusRating.
Dagong made a splash when it issued its first sovereign debt ratings in 2010… putting the United States two notches below AAA. And it downgraded Uncle Sam further last year.
The joint venture will be based in Hong Kong. “It is an historic imperative,” reads a statement from the three companies, “to establish a new type of international credit rating system which follows the inherent requirements of credit rating and which is aligned to the common interests of human society.”
Florid rhetoric aside… Nice job on Egan-Jones’ part of sticking a finger in the feds’ eye.
Cheers,
Dave Gonigam
After the Downgrade, the Deluge appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.
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