CREDIT RATING AGENCIES

 Many of us have either bought shares at some time or the other. We generally go by what the Credit Rating Agencies like CRISIL, S&P, CARE or MOODYS, or FITCH. But how many of us are really aware as how do these agencies work. Do you know for example that the client pays for the ratings? That many a times there is a conflict of interest between the rating agencies, the client and the common investor. Generally an investor normally bases his decision for investment in the financial market on the reviews of Credit Rating Agencies. But do they really do their job in an unbiased and open manner. The answer is NO.

The Credit Rating Agencies (CRAs) insist that they have a strong incentive to maintain the highest quality of rating, since issuers will approach a CRA for ratings only if its opinions carry credibility with investors whom they are trying to access. Nevertheless, there are questions about whether all CRAs adopt uniformly high governance and process standards. But unfortunately this is not true. The SATYAM scam and the role of  Water Price Cooper is well known for me to give details here. Then the Harshad Mehta and Ketan Parikh Stock Market Scam is again well known. In both the cases the CRA's did nothing to warn the investors. Do you know that the Credit ratings of  most of the top banks of the US which were involved in the financial scam in 2004 - 2008 had their Credit ratings as A or A+ (meaning high degree of safety) one week before some of them just collapsed. This could not have happened without their connivance or the Rating System is rigged by Big Corporates and banks. Did you know that in in 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means. 


Do you know that the famous Insurance Firm AIG has been fined millions of dollars each year from 2003 to 2006. Similarly CitiBank was also fined millions of dollars between 2002 and 2005.  Check this out for details.


So what does the common investor do?? Avoid over reliance on ratings by these CRAs and use common sense. Remember any deal which seems to be too lucrative is really too good to be true. Avoid it.

The everpresent BABUDOM in our RWA

Babudom . This is a noun used informally in South Asia. It means  bureaucracy as allegedly created and perpetuated by babus. Also called babucracy. I used to think this term and such specimen are only present in government organisations and other civil agencies. How wrong I was.I have been encountering them daily in the RWA meetings. The purpose of a bureaucracy is to successfully implement the actions of an organization of any size, but unfortunately in our Society we have turned it into a fine art on how to ensure that a thing is not done in time. The Committee meetings remind me of the following sayings:

" A committee is a thing which takes a week to do what one good man can do in an hour.  ~Elbert Hubbard"   

Meetings are indispensable when you don't want to do anything.  ~John Kenneth Galbraith.

 The RWA has certainly turned this into a fine art on how to ensure things are not done in time. 

Will things change???????? May be not in the immediate future, people are too stuck in the 19th Century Grove, where computer is an alien thing, consulting others is not heard off and taking suggestions from others below dignity. All things must be done by hand, cannot depend on the computer are still the moto. 

Am I being too pessimistic ?? May be, but this is one time I sincerely hope I am proved wrong..................

 

I had been very busy with my job as the Secretary.  Nearly one year has passed and one can now look back and access the year that has gone by.

There are a number of issues which need to be addressed in a new Society. We had no office, staff or operating procedures or other admin staff we could bank on. To add to our woes,some of the RWA  Members resigned within three months for various reasons, some valid and some not so valid .

It took some three months just to get the office going. Hiring of staff was a long drawn process, we had to change some three clerks before we got the staff we feel we want. Then came the process of writing the Bye Laws and getting them approved and getting the Society Registered. Taking over of the Society and having a running battle with AWHO was an on going process. We did succeed in places and in some AWHO did not respond to our satisfaction. We are still in the process of taking on the AWHO head on, and I sincerely hope we succeed in our endeavour to tame the "BEAST".

The one aspect which consumed all my energy and time , apart from taking over, was the shortlisting of vendors for House keeping and Security. The RWA Members had divergent views on this, it used to be difficult to come to a conclusion. sadly these discussions were long drawn and I feel not too constructive. Never thee less now we have reached a stage where the internal office  organisation is more or less stablised. We now have to concentrate on running the Society, some thing for which we did not get the time we wanted , because of our pre occupation with AWHO and other such issues.

One thing which became clear with time is that AWHO had really short changed us by providing a poorly planned society where even the basic amenities like water, back up electricity and lifts not meeting the minimum standards. Little did I realise that this is what was going to consume my time, energy and mental peace. More on this later on.

I thought Army does not take part in active politics, but how wrong I was. I think in fact I am sure that politics has become the active ingredient of all Societies now. Sad but true.

More on the aims, objectives which I had set for my self and how far have I been able to achieve them.

Take care.

Deepak