A royal twist near Cinderella’s Castle. As part of an effort to restrict Disney’s ability to self-govern its theme park complex, Gov. Ron DeSantis of Florida recently appointed a new oversight board for Disney’s special tax district. He apparently did not know that Disney had already pushed through an agreement that limited the new board’s power, and that under a “royal lives clause, it could last “until twenty one (21) years after the death of the last survivor of the descendants of King Charles III, King of England living as of the date of this declaration.”
Where were the credit rating agencies?
Those looking to assign blame for the collapse of Silicon Valley Bank, and the wave of chaos that arose from its failure, have already pointed fingers at bank executives and regulators. But there’s another set 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 not only for failing to identify the dangers of the mortgage-backed securities that led to the global financial crisis but also for turning a blind eye. But how much blame they should shoulder this time is less cut and dried.
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 Silicon Valley Bank’s demise months ago, including the effect of central banks’ raising interest rates on the assets that lenders held. Standard & Poor’s also revised Silicon Valley Bank’s rating outlook to stable, from positive, in November.
But none of the agencies actually moved to downgrade SVB until Feb. 27 — the first business day after the lender published its annual report — when Moody’s analysts said they were weighing a downgrade. Bank executives spoke with Moody’s the following week, urging the agency to hold off while they sought to raise $2.5 billion in capital that week. Moody’s eventually cut SVB’s rating by one notch on March 8, the day the bank announced its fund-raising plan.
What took the agencies so long?
They say they take longer-term views on companies and don’t adjust based on potentially temporary factors like fluctuating values of banks’ asset holdings, an approach called rating through the cycle. “Agencies tend to be reluctant to downgrade until they’re confident any increased risk isn’t fleeting,” said Samuel Bonsall, a professor at Penn State University’s Smeal College of Business.
Others take a blunter view: “The credit rating guys tend to be slow in changing their opinions,” said Lawrence White, a professor at NYU Stern School of Business.
