Show Hide image North America 6 August 2011 Mehdi Hasan: Time to downgrade the downgraders Standard and Poor's decision to downgrade the United States's credit rating is outrageous and undemocratic. Sign up to the Staggers Morning Call email * Print HTML Prior to September 2008 and the near-meltdown of the global financial system, who had ever heard of the credit rating agencies? Who could name the so-called big three (Standard and Poor's, Moody's and Fitch), which exerted such huge power and influence over the global economy? That's all changed now. The decision by Standard and Poor's (S&P) to downgrade the United States's creditworthiness, from top-notch AAA status to AA+, dominates today's news headlines and may finally force ordinary people across the world -- and, in particular, in the US -- to sit up and take notice of these unelected, unregulated, politicised private firms, with horrific track records and excessive power over democratic governments. As I wrote in today's Guardian (prior to the downgrade decision by S&P, I hasten to add!): In recent weeks, we have witnessed elected leaders in the world's most powerful nation dancing to the tune of David Beers. He's the moustachioed, chain-smoking head of sovereign credit ratings for S&P, the largest and arguably most influential member of the big three. "You may have never heard of David Beers but every finance minister in the world knows of him," noted Reuters in a recent - and rare - profile of the analyst, who doesn't even have a Wikipedia page. It is Beers who recently downgraded Greece's credit rating to near-junk status, thereby making the EU's proposed rescue plan much more difficult. And it is Beers who now demands the US reduce its long-term budget deficit by $4tn - rather than the congressionally approved $2.4tn - and threatens to impose the first-ever US government downgrade, from AAA to AA. It isn't just the Tea Party holding the US to ransom. Three questions come to mind. First, who elected David Beers or his Moody's and Fitch counterparts? By what right do they decide on the fate of governments, economies, debts and peoples? Second, why should we care what Beers thinks? What credibility do he and his ilk have? The bipartisan Financial Crisis Inquiry Commission in the US has described the big three as "key enablers of the financial meltdown". The commission's January 2011 report concluded: "The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly ... Their ratings helped the market soar and their downgrades through 2007 and 2008 wreaked havoc across markets and firms." Third, would a downgrade in the US's credit rating really be that apocalyptic? Or could the world's biggest economy survive such a blow? Politicians and, in particular, finance ministers have fetishised the triple-A rating, and conventional wisdom says that a country's interest rates will rise sharply on a downgrade. But a study by JPMorgan Chase last week showed only a slight increase in lending rates for countries that lost their AAA rating. In May 1998, S&P marked down Belgium, Italy and Spain from AAA to AA, but 10-year rates barely moved in response. In some cases, rates fall. In Ireland, for instance, 10-year rates fell 0.18 percentage points a week after S&P took away the republic's triple-A rating in March 2009. You can read the whole piece here. You can read Reuter's fascinating profile of David Beers here. › The decision to renew Trident needs to be urgently reviewed Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12. Subscribe from just £1 per issue More Related articles What does François Bayrou's endorsement of Emmanuel Macron mean for the French presidential race? Novelty isn't enough for Emmanuel Macron and Martin Schulz After Article 50 is triggered, what happens next?