Zerohedge has this shock headline: “Europe Launches Ban On All Policy Criticism By Scrapping Use Of Rating Agencies“. The story is reported “via Bloomberg”, but without a link. Zerohedge seems to like shocking headlines, so this is a great story for them, but it is really too shocking to be credible.
Since there was no link to Bloomberg, I asked google for help. I found a few other economics bloggers who picked up the story, but they were all quoting zerohedge. Bloomberg did not have a story with the reported headline.
It was pretty clear that the headline was misreported. I found the following story by Bloomberg: EU Lawmakers Seek to Scrap Credit-Ratings Rotation Plan. It is on the same topic of rating agencies, and a lot more realistic, but not the same headline. Then I found this comment on the Bloomberg story:
“EU Lawmakers Approve Amendment to Scrap Use of Credit Ratings
What a missleading headline. They aren’t scrapping ratings at all, only the rotational requirement. Keep on spinning bloomberg.”
So apparently the story was posted originally with an irrelevant and completely incorrect headline, and picked up by zerohedge without reading the story. Many people are so disturbed about EU monetary policy – and it is definitely disturbing – that they automatically accept any story on the subject.
In this case, the report did not fit at all with the sort of policies that the EU implements as part of their economic mismanagement. The EU, being very bureaucratic and with a strong belief in central control, creates too many regulations and regulatory bodies, not too few. If the EU had a problem with rating agencies (and they probably do), they would never simply disregard them. They would instead create a new EU rating agency, under the auspices of the IMF or similar body, which would work directly with the European Central Bank. They would absorb the rating industry into the EU, not try to push it out. So even when we recognize that the EU cannot be trusted on financial responsibility, there was still no way to believe the report that they were going to stop paying attention to rating agencies.