Public Credit Rating Agencies: Increasing Capital Investment and Lending Stability in Volatile Markets

211 Pages·2015·2.59 MB·English

by  Susan K. Schroeder

Public Credit Rating Agencies

Public Credit Rating

Agencies
Increasing Capital Investment and
Lending Stability in Volatile Markets
Susan K. Schroeder
public credit rating agencies
Copyright © Susan K. Schroeder, 2015.
All rights reserved.
First published in 2015 by
PALGRAVE MACMILLAN®
in the United States— a division of St. Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Where this book is distributed in the UK, Europe and the rest of the world,
this is by Palgrave Macmillan, a division of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills,
Basingstoke, Hampshire RG21 6XS.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN: 978–1–137–36580–4
Library of Congress Cataloging-in-Publication Data
Schroeder, Susan K.
Public credit rating agencies : increasing capital investment and
lending stability in volatile markets / Susan K. Schroeder.
pages cm
Includes bibliographical references and index.
ISBN 978–1–137–36580–4 (hardback : alk. paper)
1. Credit bureaus. 2. Capital investments. 3. Business cycles. I. Title.
HG3751.5.S37 2015
3329.0415—dc23 2015009602
A catalogue record of the book is available from the British Library.
Design by Newgen Knowledge Works (P) Ltd., Chennai, India.
First edition: September 2015
10 9 8 7 6 5 4 3 2 1
To the memory of my dad
David W. Schroeder Sr.

Contents

List of Figures and Tables ix
Preface xi
1 Introduction 1
2 Functions and Malfunctions of the Rating Industry 9
3 Private Credit Risk 25
4 Sovereign Credit Risk 73
5 Regulatory Capture 105
6 Public Credit Rating Agency: Functions and Structure 125
7 Conclusion 161
Notes 173
Bibliography 179
Index 191

Figures and Tables

Figures
2.1 NRSRO ratings by asset class: 12 months ending
December 2013 (Total: 2,437,046) 10
3.1 Volatility indicators for selected countries,
based upon % change in gross capital formation 57
3.2 Volatility indicators for Japan and Korea,
based upon % change in gross capital formation 58
3.3 Volatility indicators for Australia, New Zealand
and United Kingdom, based upon % change
in gross capital formation 58
3.4 Manufacturing (% of total value added):
selected countries 59
3A.1 Minsky’s graphical determination of investment
and finance 70
4.1 General government debt/GDP: selected countries 95
4.2 Central government debt/GDP: selected countries 95
4.3 GDP growth (% change): selected countries 95
4.4 Central government expenditure (millions of euro)
and share of GDP: selected countries 96
4.5 Composition of expenditures by central
governments: selected countries 97
4.6 Central government net lending (% of GDP):
selected countries 99
4.7 Current tax receipts by source (millions of euro):
selected countries 99
4.8 United States: debt/GDP and net lending/GDP 101
6.1 Incremental rate for the US economy (1997–2013):
OECD vs. NIPA 134
6.2 Growth rate of real personal consumption
expenditures: United States (1990–2013) 135