A royal twist near Cinderella’s Castle. As part of an effort to restrict Disney’s ability to self-govern its theme park complex, Governor Ron DeSantis of Florida recently appointed a new oversight board for Disney’s special tax district. Apparently he did not know that Disney had already promoted an agreement that limited the power of the new boardand that under a “real lives clause, it could last “until twenty-one (21) years after the death of the last surviving descendant of King Charles III, King of England alive at the date of this declaration”.
Where were the credit rating agencies?
Those who seek to blame the collapse of Silicon Valley Bank and the wave of chaos that arose from its bankruptcy have already pointed the finger at bank executives and regulators. But there is another group of watchdogs that didn’t see the chaos coming: the major credit rating agencies, Moody’s, Standard & Poor’s and Fitch.
Fifteen years ago, they were blamed for not only failing to identify the dangers of mortgage-backed securities that led to the global financial crisis, but also for turning a blind eye. But how much blame they should take this time is less cutting.
What did the agencies say in the run up to the SVB crisis?
They correctly identified as risks some of the factors that led to the demise of Silicon Valley Bank months ago, including the effect of central banks. raising interest rates about him assets held by lenders. Standard & Poor’s too revised Silicon Valley Bank’s rating outlook to stable, from positive, in November.
But neither agency moved to downgrade SVB until February 27, the first business day after the lender published its annual report, when Moody’s analysts said they were considering a downgrade. Bank executives spoke to Moody’s the following week, urging the agency to hold off as they looked to raise $2.5 billion in capital that week. Moody’s finally downgraded SVB by one notch on March 8, the day the bank announced its fundraising plan.
Why did the agencies take so long?
They say they take longer-term views on companies and don’t adjust for potentially temporary factors, such as the fluctuating values of banks’ asset holdings, an approach called through-the-cycle rating. “Agencies tend to be reluctant to downgrade until they are sure that any increase in risk is not temporary,” said Samuel Bonsall, a professor at Pennsylvania State University’s Smeal College of Business.
Others take a stronger view: “Credit scoring types tend to be slow to change their minds,” said Lawrence White, a professor at New York University’s Stern School of Business.
