We must free ourselves from the tyranny of the credit rating agencies

The disastrous record of the rating agencies proves that they do not deserve their exalted position.

"We have not overthrown the divine right of kings to fall down for the divine right of experts."

Harold Macmillan

When Macmillan warned about a tyranny of "experts", he probably didn’t have the credit rating agencies in mind.  But in 2012, it probably applies to them more than any other category of experts. These anonymous bodies hold enormous power over democratically elected governments. Their musings are often enough to force a government turn away from the democratic mandate on which they were elected. Only yesterday, Moody’s caused panic by stripping France of its AAA status.

Have these anonymous, powerful experts deserved the credibility and the exalted position they are given by the media and politicians? Have they shown real foresight that merits their ability to lecture elected politicians? In almost all cases, the answer is no. 

In December 2009, Moody’s decided to address growing concerns about the indebtedness of the Greek government.  Its declaration was clear, decisive and wrong, with its report being titled, "investor fears over Greek government liquidity misplaced." Moody’s suggested that, "the risk that the Greek government cannot roll over its existing debt or finance its deficit over the next few years is not materially different from that faced by several other euro area member states." It then went on to declare that, "there is an extremely low probability that the government's liquidity will pressured."

Only six months later, the first EU/IMF bailout package – of €110bn was agreed. And this slip up from the credit agencies came just over a year after their failure to predict the financial crisis that pushed most of the western world into recession. Lehman Brothers and AIG were still AAA or AA rated just before they collapsed.  At the congressional hearings into the pre-recession failure of the credit ratings agencies, they were accused of offering "opinion", rather than analysis.

Nor was this a one off. Sukhdev Johal has analysed what happened to corporate debt rated AAA by Standard & Poor.  Within three years, some 32 per cent of this debt has been downgraded and a massive 57 per cent had been downgraded within seven years. That doesn’t really suggest that the lionised credit rating agencies have much credibility in either the short or the long term.

There are important discussions to be had about the way in which European economies should be heading and crucial debates about a variety of policy directions. But we should stop kidding ourselves about the credit ratings agencies and stop thinking that their declarations should be decisive.

You can follow David on Twitter @djskelton

A sign for Moody's rating agency is displayed at the company's headquarters in New York. Photograph: Getty Images.

David Skelton is the director of Renewal, a new campaign group aiming to broaden the appeal of the Conservative Party to working class and ethnic minority voters. @djskelton

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Why Barack Obama was right to release Chelsea Manning

A Presidential act of mercy is good for Manning, but also for the US.

In early 2010, a young US military intelligence analyst on an army base near Baghdad slipped a Lady Gaga CD into a computer and sang along to the music. In fact, the soldier's apparently upbeat mood hid two facts. 

First, the soldier later known as Chelsea Manning was completely alienated from army culture, and the callous way she believed it treated civilians in Iraq. And second, she was quietly erasing the music on her CDs and replacing it with files holding explosive military data, which she would release to the world via Wikileaks. 

To some, Manning is a free speech hero. To others, she is a traitor. President Barack Obama’s decision to commute her 35-year sentence before leaving office has been blasted as “outrageous” by leading Republican Paul Ryan. Other Republican critics argue Obama is rewarding an act that endangered the lives of soldiers and intelligence operatives while giving ammunition to Russia. 

They have a point. Liberals banging the drum against Russia’s leak offensive during the US election cannot simultaneously argue leaks are inherently good. 

But even if you think Manning was deeply misguided in her use of Lady Gaga CDs, there are strong reasons why we should celebrate her release. 

1. She was not judged on the public interest

Manning was motivated by what she believed to be human rights abuses in Iraq, but her public interest defence has never been tested. 

The leaks were undoubtedly of public interest. As Manning said in the podcast she recorded with Amnesty International: “When we made mistakes, planning operations, innocent people died.” 

Thanks to Manning’s leak, we also know about the Vatican hiding sex abuse scandals in Ireland, plus the UK promising to protect US interests during the Chilcot Inquiry. 

In countries such as Germany, Canada and Denmark, whistle blowers in sensitive areas can use a public interest defence. In the US, however, such a defence does not exist – meaning it is impossible for Manning to legally argue her actions were in the public good. 

2. She was deemed worse than rapists and murderers

Her sentence was out of proportion to her crime. Compare her 35-year sentence to that received by William Millay, a young police officer, also in 2013. Caught in the act of trying to sell classified documents to someone he believed was a Russian intelligence officer, he was given 16 years

According to Amnesty International: “Manning’s sentence was much longer than other members of the military convicted of charges such as murder, rape and war crimes, as well as any others who were convicted of leaking classified materials to the public.”

3. Her time in jail was particularly miserable 

Manning’s conditions in jail do nothing to dispel the idea she has been treated extraordinarily harshly. When initially placed in solitary confinement, she needed permission to do anything in her cell, even walking around to exercise. 

When she requested treatment for her gender dysphoria, the military prison’s initial response was a blanket refusal – despite the fact many civilian prisons accept the idea that trans inmates are entitled to hormones. Manning has attempted suicide several times. She finally received permission to receive gender transition surgery in 2016 after a hunger strike

4. Julian Assange can stop acting like a martyr

Internationally, Manning’s continued incarceration was likely to do more harm than good. She has said she is sorry “for hurting the US”. Her worldwide following has turned her into an icon of US hypocrisy on free speech.

Then there's the fact Wikileaks said its founder Julian Assange would agree to be extradited to the US if Manning was released. Now that Manning is months away from freedom, his excuses for staying in the Equadorian London Embassy to avoid Swedish rape allegations are somewhat feebler.  

As for the President - under whose watch Manning was prosecuted - he may be leaving his office with his legacy in peril, but with one stroke of his pen, he has changed a life. Manning, now 29, could have expected to leave prison in her late 50s. Instead, she'll be free before her 30th birthday. And perhaps the Equadorian ambassador will finally get his room back. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.