In his recent book ‘Gods of Money,’ William F. Engdahl revealed how Wall Street Secret Society has been plundering the vast wealth of the world.
Jeffrey Grupp expanded this argument in his book, ‘Corporatism: The Secret Government of the New World Order.’
Similarly in his book, ‘The Rise of the Fourth Reich: The Secret Societies that threaten to take over America,’ Jim Marrs goes as far as giving a more chilling insight into the workings of Wall Street as a money secret society.
One of these systems of plunder is the credit rating system, another layer of Wall Street Secret Society, used in luring unsuspecting investors who falsely believing that financial markets are by nature ‘’efficient,’’ will believe in their own detection of any fraud.
Unknown to these unsuspecting investors, the secret society operating on Wall Street has since perfected this insidious system.
Leading the Wall Street credit rating monopoly are three private, self-regulated, and profit-making Moody’s, Fitch, and Standard & Poor’s. And because investors around the world have relied on their ratings, in response, companies around the world have hired these rating agencies to give them the highest possible ratings money can buy.
The more these credit rating agencies assign high ratings to investment bank’s junk portfolios, the more they attract unsuspecting buyers. As a result, these credit rating firms spend most time experimenting and perfecting how to generate more pleasing and beneficial inaccurate ratings for the companies to use to mislead the public.
Confirming this, Robert Reich, a professor of economics and former US Labor Secretary said, ‘’Credit-rating agencies are paid by the same institutions that package and sell securities….If an investment bank doesn’t like the rating, it doesn’t have to pay for it. And even if it likes the rating, it pays only after the security is sold…It’s as if movie studios hired film critics to review their movies, and paid then only if the reviews were positive enough to get lots of people to see the movie.’’
The results of these fabricated ratings couldn’t be more devastating in 2008 as countless investors, most particularly institutional investors such as retirement and pension funds had their life-savings unknowingly invested in junk securities disappear.
Unfortunately, for those who happened to have been swindled, it’s extremely difficult to sue and win lawsuits against these rating agencies. This is because the US Constitution’s First Amendment protects citizens from lawsuits on the basis of exercising their constitutional right to free speech.
Because Rule 10b-5 of the US Securities and Exchange Act of 1934 states, ‘’It shall be unlawful for any person…to make any untrue statement of a material fact,’’ believing that Rule 10b-5 overrules the first amendment, Oliver von Schweinitz in his book, ‘’Rating Agencies: Their business, Regulation and Liability, Secularisation without ratings are unthinkable,’’ argued that despite hiding behind the first amendment a case against the rating agencies could be won on Rule 10b-5.
In a 2005 ruling in ‘Dura Pharmaceuticals, Inc versus Broudo,’ the US Supreme Court Justices unanimously ruled that ratings are not ‘’statements of a material fact’’ as required under Rule 10b-5.
With this ruling, the US Supreme Court made it as clear as possible to those seeking the services of credit rating agencies to be fully aware that using such information provided by these agencies, should be doing on one’s full knowledge that what these rating agencies are expressing are their free speech statements, and for Rule 10b-5 to apply, the investor should have to prove beyond reasonable doubt that there had been a deliberate and material misrepresentation of facts that have directly or ‘’proximately’’ caused such investor an economic loss.
In other words, for a rating agency to be liable for its ratings; the lawsuit should prove how the rating itself could be the ‘’proximate cause’’ of such investor’s economic loss including: (1) showing with sufficient proof that as an investor one had solely relied on the rating as accurate; (2) that the rating had been intentionally misleading and fraudulent; and (3) proving how the said fraudulent rating caused the stock price to fall, thus caused the investor’s economic loss.
Since what they do are expressing, as ruled by the Supreme Court, are mere personal opinions, which they are entitled to under the first amendment free speech, the rating agencies have since gone ahead in helping companies swindle investors without any regard to the moral and ethical consequences.
Unfortunately, whenever these same cash and carry ratings by Fitch, Moody’s and S&P are provided to Nigeria; Coordinating Minister of the Economy and Minister of Finance, Mrs. Ngozi Okonjo-Iweala, picks full page advertorial in several newspapers in celebration.
For instance, when Fitch raised Nigeria’s rating from BB-Negative to BB-Stable, and S&P raised its rating of our country from B+ to BB-Stable; drums were rolled out in celebration without anyone demanding their methodologies in arriving at such ratings.
For some time now, Guan Jianzhong, President of Beijing based Dagong Global Credit Rating Company, has been protesting that this credit rating cartel, run by three US private owned rating agencies are simply promoting US strategic national interests while marking down on more creditworthy economies like China.
His argument is based on the faulty rating methodology they use in assigning such ratings. For instance, he insists not to understand how they should be handing higher ratings to the US than to China; not only that China has over $3.7trn dollar-denominated foreign reserves but also the US debt to GDP ratio stands at 106 per cent against China’s mere 22 percent debt to GDP ratio?
To further advance his argument, the Dagong boss believes that a country as indebted as the US should not be awarded higher credit ratings than its creditor, China. Or isn’t it bizarre that a consumer debtor nation is more creditworthy than a producer creditor nation?
For this current borrower-dominated system to be changed to lender-dominated one, Mr. Jianzhong insists that credit rating agencies should stop basing their ratings on western ideology, US national strategic interest, so-called western political ideals and openness of a country’s economy, so-called financial markets’ and central banks’ independence, and above all on the basis of being reserve currency economies.
Besides insisting that each country’s economic prospects should be determined by its industrial structure, the size of its economy and economic competitiveness as well as financial risk control mechanisms, he also demands the need for a non-sovereign rating system with universally recognized rating criteria and a global supervision system.
His long argument that the US credit ratings being politically motivated are used as instruments of intimidation and imperialism became obvious when Standard and Poor’s suddenly lowered Russia’s sovereign rating to close to a junk; which Chris Weafer, a partner at Moscow-based Macro Advisory, believes was a kind of trying to punish Russia for the annexation of Crimea.
In full agreement, Igor Shuvalov, deputy prime minister of Russia said that the biggest damages to Russia were never the US sanctions targeted on Russian politicians and tycoons, but the ‘’hidden’’ pressure from the US on rating agencies, designed to trigger mass exit of western investors from Russia.
In reaction to what was obviously an attem
pt to undermine the Russian economy; Russian and Chinese leaders have since led discussions on the need to create BRICS’s own rating agency, which seems to have been receiving the approval of all the BRICS member nations, who have since perfected how to create the BRICS Development Bank as a counter to the World Bank.
On our own part, the CBN should ban any form of advertisement of credit ratings awarded to Nigerian banks by any foreign credit rating agencies. Just like ban advertising of all forms of cheap foreign awards, ratings awarded by foreign credit rating agencies should be banned for they are merely conducted on the cash and carry basis.