Ratings agencies have become (always were?) so corrupt and self-serving as to make much of their analysis more or less worthless, and certainly not something you'd want to put a highly-levered bet on.
Against, maybe. But not on.
The government has been trying to drum up some competition for the Big Three for years, to no avail. Until now: Morningstar, the mutual funds and, of late, hedge fund research giant, is here to do battle for the forces of good and right, offering corporate credit ratings for the first time. And if your name is Pitney Bowes, that's really bad news.
Morningstar's ratings may be less susceptible to bribery undue influence, because unlike the three existing credit rating agencies, companies desiring a rating will not have to pony up. Investors will have to pay for Morningstar's actual research, if they care enough to read t.
Unfortunately, for its new venture Morningstar is doing away with its five-star ratings system. So there will be no parsing as to whether 4¼ stars equates to A1, A2, A-plus or just A.
Even worse, however, is that Morningstar won't be rating the securities that we really need someone else to rate: the mortgage-backed securities whose triple-A ratings--which proved as illusory as Vikram's zen garden--paved the way to the credit crisis.
And that's a real shame. Maybe Morningstar or some other potential competitor will wade into that minefield someday--the former's bond ratings are currently being produced by its equity research staff, and the company has so far hired just two credit analysts for the new gig--but we could really use somebody or something to make some effort to keep Fitch, Moody's and S&P honest.
I wonder where we could find something like that.
Morningstar launches U.S. corporate credit ratings [Reuters]
Morningstar Issues Corporate Credit Ratings [WSJ]