The Five Year Fitch

May 12, 2010

The propaganda keeps rolling in, like waves of trash breaking against the British political system and media.

The latest financial interest to weigh in on the urgent need for deficit reduction is the ratings agency Fitch which, as the Guardian reports, has been warmly applauding the new Lib-Con coalition government’s commitment to a fixed five year parliament.

As the ratings agency states, “the agreement to a five-year term reduces the risk of a government of short duration which may have less incentive to focus on medium term fiscal challenges” while “A strong and credible medium-term adjustment plan will be important to underpin the UK’s AAA-credit rating, particularly as investor concerns about sovereign risk in advanced economies have risen.”

Again, voices from the City are threatening a downgrade from the ratings agencies, in this case with the added clout of that voice coming from…a ratings agency. As such bodies have enormous influence in the decisions made by bond investors, an implied threat like this represents a gun to the head of Cameron and co.

Without considering the role that financial goons like Fitch are playing in manipulating the political system, it is hard to understand why the Lib Dems or Tories would agree to fixing the date of the next election. To do so in the context of a coalition government between highly suspicious partners, with the possibility of future wars or economic situations, would otherwise be tough. Indeed, this has never happened before in the UK, a reflection of how much pressure is being exerted upon politicians to listen to the financial oligarchy.

In an ideal world, there would be no reason to fear the opinions of institutions like Fitch, as we would be utterly confident in their propriety and accuracy. But, as with the other two ratings agencies (Standard and Poors and Moody’s) we have no grounds for either.

Fitch, few people will know, is actually virtually the private fiefdom of French billionaire Marc Ladreit de Lacharriere – who made his billions grading the risks attached to various forms of debt. In the process, some have argued, he has done so using shady methods, forging all-too-cosy relationships with valued clients and operating what in a recent profile Forbes openly describes a “racket” with the other agencies.

Although a relatively small player in the triumvirate of raters with 16 percent “market” share, Fitch was an enormous player in the rating of sub-prime mortgage derivatives. As Forbes reports, Lacharriere made millions in 2006 as his firm rated 54 percent of such deals.

Such a record has not endowed Lacharriere with any love of democracy. On the contrary, the growth of his ratings firm seems to depend upon generating business in some pretty undemocratic places. As he told Forbes in 2008, “Tell them there’s a credit crisis in Moscow, and they’ll look at you like you’re crazy” while the magazine added that “Fitch’s business in Europe and Asia expanded at 38% and 34%, respectively, last year, twice the rate of that in the U.S.”

There is, to be short, absolutely no reason to take what Fitch says on politics as oracular truth, but there is every reason to see it as bullying propaganda dedicated towards enforcing policies that will benefit its ultra-wealthy CEO and those of his economic class.

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One Response to “The Five Year Fitch”

  1. Watsonlow Says:

    There can be no doubt that the ratings agencies are the creatures of the investment banks. You only have to look at the track records of their senior executives. Nevertheless, I think you are concentrating your fire on the wrong target. The government has the task of cutting the deficit by a combination of expenditure cuts and tax hikes. If you want to get out on the street it should be to ensure that they don’t cut essential services or impose higher levies on the disadvantaged. From their public utterances so far they are not planning anything of that nature.


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