David Beers, the boss of Standard & Poor's, is surviving the mud-slinging. His assertion yesterday that there is a one in three chance of a further downgrade of the US's credit rating was not the statement of a man rattled by the attempts to ridicule his work since Friday night's shock.
To which one should say, good for him. For the response of those disappointed by Friday's downgrades, led by the US Government itself, has been thoroughly unseemly. Mr Beers is the messenger who got shot.
Of all the mud thrown at S&P, the idea that no one should listen to what it has to say because it failed to see the sub-prime crisis coming four years ago is the most ridiculous. It's certainly true that the credit ratings agencies did not cover themselves in glory during the credit crunch. But they were hardly alone – the world's financial regulators got horribly caught out too, as did much of the banking sector. And our political leaders, whose liberalisation policies contributed to the crash, were not blameless either.
The truth is that it doesn't matter what the US Government thinks of S&P and its ilk (Moody's latest pronouncement yesterday was not a ringing endorsement of AAA by the way). The reaction that counts is that of the markets.Interestingly, those markets did not seem particularly bothered yesterday – the yield on US Treasuries fell. In other words, bond investors charged the US less for its debt, not more.
There are some simple explanations for that. The downgrade was priced in to some extent and many investors felt US debt still represented a safe haven compared to, say, eurozone paper. Also, since the ratings agencies' failure during the credit crunch, the US has dropped legislation requiring investors to avoid bonds of certain grades – they're now expecting to do more of their own research. The importance of the rating agencies has thus been reduced and downgrades do not automatically trigger sell-offs.
Nevertheless, the sanguine reaction to the downgrade must also suggest that the markets take the verdict of S&P with something of a pinch of salt. That means investors have made judgments of their own.
Still, S&P, Moody's, Fitch and myriad smaller, specialist agencies exist for a reason. They provide independent, standardised yardsticks that investors can use to inform their decision-making. And that they are still in business means their clients believe the advice is worth paying for.
Even if we expect investors to take greater responsibility for their own due diligence, which is surely desirable, a role remains for these agencies. We may not always like what they have to say, but if we did, there would be no point to them at all.