The City of Los Angeles will no long hire Standard and Poor’s to rate the city’s investment portfolio. From the LA Times:
“We have really lost faith in S&P’s judgment,” Interim Treasurer Steve Ongele said.
After its downgrade of U.S. debt last week, S&P cut its rating of L.A.’s general investment pool to AA from AAA. It also downgraded dozens of other municipalities with large investments in U.S. Treasury notes.
One of them, Northern California’s San Mateo County, has decided not to renew its contract with S&P. Florida’s Manatee County has also dropped its contract with the company, according to news reports.
Given the exceptionally poor and possibly fraudulent job the ratings agencies did in judging the credit worthiness of mortgage backed securities in the run up to the economic crash, I fail to see why anyone would trust S&P’s analysis or actually pay for it.
According to the article this move will save the city $16,000 a year. I have little doubt that almost anything else the city decides to spend that money on will be a better use of the funds.
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