ALLIANCE FO§ DEMOCRACY

European rating agency

The Berlin company Scope was to establish itself as the European rating agency (dpa). The company has been dreaming of this for two years and claims to be independent of banks and politically influenced circles and to work transparently. Such a flight of fancy requires experienced pilots. The man to do this is Torsten Hinrichs, who managed the German Standard & Poor’s for more than 15 years and became the leader of scope at the beginning of September.
This raises the question of why a (European) agency should offer real ratings, when the boss learned his trade in a company they came to be primarily known for its absurd and politically acceptable ratings and still issues these and has therefore also been sued by the US government. According to the Higher Regional Court of Frankfurt am Main, Germans were even allowed to sue S&P in Germany due to incorrect ratings, meaning ratings that were much too good, with the justification that S&P has assets in Germany. The European rating agency initially planned by Federal Chancellor Merkel, which was to ensure even better rating classifications than the American agencies with classifications that were objectively too good, in order to better entice small investors in Europe to finance the bankrupt EMU and all this in the form of a trust-inspiring foundation, which deserves no trust, because normal citizens would of been misdirected as small investors to purchase rotten bonds of bankrupt countries with immediate losses due to market value depreciation as all investing life insurance companies would of done for their insured clients on average. An obvious government-sponsored investment fraud, which is breathtaking when one considers that German Federal Chancellor, who still enjoys an approval rating of 40% - 50%, could even consider such a thing.

And now another cryptically hidden attempt. Small investors should remain vigilant.
At the beginning of the year, Hinrichs left the management of S&P without giving a reason. Apparently, the manager sought self-fulfillment. It is understandable that a company like Standard & Poor’s, which is among the three large American rating agencies that dominate the market, does not tolerate any competition under its roof. Hinrichs was let go and looked for a company that was willing to develop into a European agency under the direction of Hinrichs. The Berlin company Scope, which was founded in 2002 as a rating agency for investment funds, seems to be this partner. In order to avoid any conflict, the company first metamorphosed into a public holding company, so that Scope founder Florian Schoeller would not be kicked out of his own company, but rather may retain the majority interest. Then, Hinrichs said that Scope wanted to impress its customers “with integrity and modern analysis”. The evaluations were to be “clear and understandable”.
With regard the ratings, it remains to be seen whether Hinrichs and his team will be able to counter American ratings with European ratings and whether these will then seem real or still politically acceptable. It seems a bit cowardly that Scope intends to rate banks and loans, but intends to avoid rating the credit worthiness of states, which companies in Switzerland or Holland offer. The three American companies will continue to call the shots with regard to this and this shows that the love of a training company has limits, when faced with the development of its bosses. Thus, S&P also cunningly prevents the creation of an agency in Europe as a counterbalance to its own ratings. And thus, the idea of a European rating agency failed once again.
It remains to be seen whether the apprentice will categorically reject the ideas of his mentor, as happened once upon a time between the Spanish dictator Franco and his foster son King Juan Carlos of Spain. And ultimately: who says that’s the point? First and foremost, Scope creates a market advantage with the name European rating agency and can perhaps expect more orders due to its self-made reputation – because the money market is also subject to fashion and vanity and works primarily for business. And this is not oriented toward the benefit for investors, but rather the profit of the service providers, with the exception of lobbyists and others, who can profit from this – such as Federal Chancellor Merkel with her idea of a European rating agency and then the Bertelsmann group with the Bertelsmann Foundation with an international rating agency extending beyond Europe (INCRA, which is supposed to create even more trust toward Europe internationally and this in the form of a foundation, which in and of itself generates trust) were supposed to be. Both plans were abandoned due to massive criticism, both high finance through Bertelsmann as well as the federal government through Frau Merkel folded. That means they must have felt caught. So everyone should take care. It’s best to avoid this, too. As long as the relationships are not totally revealed.

One should also wait for the final decision regarding the lawsuit of the US government against American rating agencies.