The "Big Three" Credit Rating Agencies in One Minute: Standard & Poor's/S&P, Moody's and Fitch Group

Ask a random person if he has ever heard of "S&P" and he might say that yes, the term sounds familiar but then again, chances are the individual in question would probably make the same statement if you asked him about "P&G" or any other "you've probably heard about it but don't quite know where" household name.
Unfortunately, the overwhelming majority of individuals know next to nothing about why credit rating agencies such as the (in)famous big three (Standard & Poor's, Moody's and Fitch Group) exist and most importantly... why the average person should care.
Ironically, ask the same people about the Great Recession and you will hear a mouthful about how bad it was for them. Unfortunately, credit rating agencies have played a key negative role as far as the entire MBS fiasco associated with the Great Recession is concerned and as such, it might be wise to learn a thing or two about them.
Does the purpose of this video revolve around explaining that Moody's, S&P and/or Fitch are somehow evil entities that indent to destroy the financial world as we know it? Of course not, credit rating agencies can actually be extremely useful under the right circumstance, which is why it is important to place adequate pressure on them to treat their systemic role much more seriously. Fair enough?

[@OneMinuteEconomics]

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[@nathanngumi8467]

Thanks.

[@OneMinuteEconomics]

You're more than welcome Nathan :)

[@MarksPhsoschaBughl]

If you ever wanted to invest, this is a stock you want

[@OneMinuteEconomics]

Quick note: we are going through difficult times and I realize that for some of you guys, things are anything but peachy. Should you be in need of help or at least a sympathetic ear, shoot me an email at andrei at one minute economics dot com and I'll do my best to be of assistance. I wish all of you the best of luck and through future videos, will do my best to provide what I believe will be much-needed clarity.

[@PacoBotMX]

1:00 Standard & Poor,s

[@runner4928]

How does standard and pores give the United States government a triple A rating when they're insolvent

[@OneMinuteEconomics]

Hard to be insolvent when you can print the world's reserve currency. Can that "solvency" prove to come at a steep price in terms of purchasing power? That is, of course, an entirely different discussion :)

[@ryanhartigan]

Is it true that the credit ratings played a big role in the recession? I feel like most lenders don’t really give a fuck what a credit bureau says for a rating, they’re going to look at trade lines and credit history and determine their own rating

[@OneMinuteEconomics]

Hi Ryan, they played a big enough role because credit rating agencies have a role in the ecosystem that goes beyond just providing information, for example when it comes to institutional investors and their more or less bureaucracy-laden decision-making processes (a validation role, for example, if you will).

[@iloveass2289]

you didn't explain how these agencies make money

[@MarksPhsoschaBughl]

They charge to rate companies bonds. Pretty much the most solid stock

[@MarksPhsoschaBughl]

If, say, Uber wants to get funding (pre-IPO most likely) or borrow money, they pay MCO or SPGI a fee. $50k per rating for Moodys. SPGI is bigger than MCO, but they are considered equals. Fitch seems like the tiebreaker rating. These companies also rate munici[ple bonds, like a school system. It's the most legal way to print money

[@OneMinuteEconomics]

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[@jorgecampos9060]

34177166

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