Gestión de productos

As a result of the above developments, CRAs have been placed in an authoritative position, affecting both borrowers and lenders. While as pointed out by Sinclair (2005) such authority may have been ‘camouflaged’, as compared with other seemingly more imperative institutions such as the IMF and the World Bank, due to the agencies’ existence as private entities, the unfolding of the processes of neoliberalism and financialization has given significant power to those agencies. Needless to say, the recognition of such power does not aim to suggest CRAs as the new “commanders of the universe”, but rather to highlight their active participation to the otherwise complex and evolving nexus of authority.

In order to understand CRAs’ power, it is important to conceptualize authority not only as a set of legally binding actions of governments, but also as a social process that involves intentionality and voluntary compliance (Sinclair, 1994; 2005). In that regard, Sinclair points out that a nongovernmental entity can acquire an authoritative status, pushing towards a situation of ‘governance without a government’, or even more towards a ‘government without a

25 | P a g e governance’ (1994: 136). Such a view suggests that CRAs’ importance goes beyond their usage as a point of reference in financial legislation.

More specifically, it can be said that CRAs have been performing the role of the gatekeeper by exercising power over rated entities, based on the latters’ need to access the financial market. As a consequence rated entities have not only found themselves in the need to comply with the agencies’ views, but have also re-shaped the way they think and act (also see Kundu, 2001 and Cooley, 2003). Based on the notion of structural power, this means that those in need of a favourable rating come to adopt the conceptual framework of CRAs and thus limit their range of choices in what would be considered to be acceptable (Sinclair, 1994).

The above implies that CRAs do not only care about ‘getting the numbers right’, but also get involved in evaluating the overall effectiveness of management- with the term effectiveness linking here with financial prudence. From the side of borrowers it means that ‘[m]akers of public policy, like corporate executives that want access to cheap finance, must acknowledge the structural power of disintermediated finance and incorporate debt security markets into their policy agendas and market plans at the earliest stages, and not as an afterthought’ (Sinclair, 1994: 142).

It would of course be fair to argue that before coming to seek for a favourable rating, potential borrowers were in the need of going through a similar process with the individual banks where they would apply for credit. Notice however that by the time the process of creditworthiness assessment shifts from banks to CRAs, a significant centralization of power comes to take place. While in the first stage the evaluation of creditworthiness is something

26 | P a g e that solely concerns one bank out of many on the one hand and the credit applicant on the other (assuming away the extreme cases of borrowers’ blacklisting), in the latter it comes to be conducted by a few institutions whose voice matters for a broader range of market participants. Although in the prior case a rejection from a bank would not necessarily prevent a potential borrower from applying for credit elsewhere, in the case of CRAs, a bad rating can come to be seen as a sort of stigma and therefore place a more severe obstacle in accessing the financial market.

On what has to do with lenders, other than the compulsory actions they would often have to take as a result of ratings’ attachment to financial regulation, their decision-making came to be affected by CRAs in one more way. This relates with the concept of Keynesian uncertainty and its associated implications. In particular, as Keynesian uncertainty exists as something fundamentally different from calculable risk (see Keynes, 1936; 1937; also see the discussion in Chapter 4 of the current), it also creates the ground for the emergence of what Keynes labels as social conventions. ‘[E]stablished as the outcome of the mass psychology of a large number of ignorant individuals’ (Keynes, 1936: 154), social conventions are primarily constructed in order to satisfy peoples’ need for stability (also see Setterfield, 2003). Being artificial and fragile in nature, those conventions are structured over the assumption that the normality of the past can be used to predict the future (Keynes, 1937).

Based on such remarks, it can be argued that throughout the last few decades CRAs actively contributed to the maintenance of a deceptive feeling of safety and stability in the market. In view of investors’ ignorance of what the future will bring, CRAs and their role as certifiers of the quality of credit

27 | P a g e managed to fill this gap. As a result, CRAs managed to make uncertainty look as if it could be converted to calculable risk, so that investors could choose the debt instruments to fund based on their ‘ratings preferences’ (also see Carruthers, 2013). As Carruthers writes, those agencies essentially managed to create the impression of homogeneity across all different debt instruments they rated, making a triple-A CDO to seem like a triple-A corporate bond. In that regard CRAs masked the underlying uncertainty. Nonetheless, it was precisely this uncertainty that became apparent in the 2007/08 crash- an uncertainty that ‘lurked beneath the surface and undermined the equivalences rating agencies were trying to construct’ (Carruthers, 2013: 542).

All in all, the rise of the influence of CRAs was neither a technical nor a neutral development. By taking them into account borrowers and lenders also had to adopt the agencies’ understanding of the workings of the economy, in either an implicit or an explicit way. Such an understanding was to a great extent underpinned by ideas related with neoliberalism, such as the ideas of balanced budgets, inflation targeting etc.8 _{In that regard, CRAs acted as an}

additional enforcer of neoliberalism, especially towards rated sovereigns (also see Sinclair, 2005 as well as the discussion below).

One way of showing the attachment of CRAs to the set of neoliberal ideas is by observing and recording their reactions to events throughout real time. Probably the most straightforward way of doing that could be by observing how CRAs respond to governments that openly oppose neoliberal policies. Here one of the most recent and indicative examples could be to see the reaction of CRAs

8 _{While as pointed out by Bayliss et al. (2015) neoliberalism relates with a wide spectrum of} ideas which are not always consistent with each other, it would be fair to argue that some of those ideas as for instance the ones outlined in the current text where at the core of the neoliberal ideology.

28 | P a g e in the follow-up of the election of the anti-austerity SYRIZA government in Greece in January 20159_{. In particular, shortly after its election, SYRIZA}

initiated a negotiation process with its European and international creditors aiming to terminate austerity and privatizations. The government’s ambition was to re-establish some basic welfare provisions, such as free access to public hospitals, and put back in place some labour legislation aiming to support the employees and the unions (e.g. re-establishment of the minimum wage)10_{. In}

view of such developments the reaction of all three CRAs was unanimous in downgrading the already low rating score of the country. S&P downgraded Greece three times within five months (with the actual rating falling from B- to CCC-), while Moody’s and Fitch conducted two consecutive downgrades each throughout the same period (Moody’s rating score fall from Caa1 to Caa3; Fitch’s rating dropped from B to CC)11_{. By the summer of 2015 all three CRAs}

had placed Greece’s rating score at the bottom of the speculative grade range, right above the default zone.

Another way to show CRAs’ attachment to the neoliberal frame of thought is by looking at the variables those agencies use in order to derive their ratings. For instance it can be easily shown that when designing sovereign ratings, the attitude of CRAs on several macroeconomic variables converges to that of mainstream economics. Indicatively, inflation is constantly associated with structural problems in government’s finances, without any serious

9 _{SYRIZA is an acronym standing for the words ‘Coalition of the Radical Left’ in Greek.}

10 _{For an indicative article on SYRIZA’s agenda, see ‘Hope begins today: the inside story to}

SYRIZA’s rise in power’, by Paul Mason, The Guardian online, accessed at

http://www.theguardian.com/world/2015/jan/28/greek-people-wrote-history-how-syriza-

rose-to-power on the 15th _{of September 2015}

11 _{All information can be found in CRAs’ websites; for a quick overview see here}

29 | P a g e consideration of the distributional benefits that might arise (for a relevant discussion, see S&P, 2011; Fitch, 2014; Moody’s, 2013; also see the evidence provided in Chapter 4). Furthermore, there is a quite hostile view against budget deficits, which rather than being taken as a potential tool for stabilizing and stimulating the economy- as suggested for example by the functional finance literature (see Lerner, 1943; Arestis et al. 2001; Arestis and Sawyer, 2013)- are constantly viewed as a reflection of government’s inability to tax its citizenry. In that way however CRAs might be missing out the fact that the tolerance of a budget deficit in the short-run might be making public debt more sustainable in the medium to long-run due to the growth prospects it might be creating. In a similar vein, Chapter 4 offers some new evidence showing how CRAs’ appreciation of public debt converges to the widely criticized perception of Reinhart and Rogoff (2010) who identify it as a harmful determinant for economic growth, once its ratio over GDP exceeds the 90% threshold.