Why Credit Ratings MatterBy
This week, the ratings firm Moody’s said it is reviewing 17 banks and securities firms for possible downgrades. Morgan Stanley, UBS, and Credit Suisse could fall three notches, it said, and Goldman Sachs, Deutsche Bank, JPMorgan Chase, and Citigroup could be cut by two levels. After ratings firms were criticized for giving top grades to investments backed by subprime mortgages before the housing bust—and investors shrugged off Standard & Poor’s downgrade of the U.S. government debt over the summer—a natural question is: Do ratings matter any more?
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