Things have gotten so bad for GE that the Wall Street Journal is openly contemplating what will happen if GE Capital is bankrupt. GE’s stock is now below $7, with the company having shed $300 billion of market cap since the peak. GE’s CEO is explaining that the company didn’t anticipate a global financial meltdown.
And yet our rating agencies, Moody’s and Standard & Poors, still rate GE AAA.
After the horror of being publicly humiliated in the subprime collapse, you’d think that the rating agencies might want to demonstrate that they do, in fact, do some analysis before giving client companies the ratings they want and expect. Apparently not.
(A reader speculates that the rating agencies are actually having their arms twisted by the government in addition to GE on this one, because of all the hell that will break loose if the agencies actually admit what kind of shape GE is in. This sounds far-fetched, but you never know.)
OK, one more dig at the rating agencies, while we’re at it.
The truth, of course, is that the rating agencies already have downgraded GE. S&P did so in December, when it put the company on “watch,” or whatever it is it calls the “get-the-hell-out-now-before-we-tell-everyone-how-bad-things-are” rating. And Moody’s followed in January.
These were ratings downgrades. The moment they appeared, GE had, to all reasonable people, lost its AAA rating.
But because GE pays the bills, and because the future of civilisation apparently rests on a 20-something analyst at S&P continuing to profess that GE is a Rock of Gibraltar, the legal rating hasn’t actually been downgraded.
And so we continue to hope, pretend, and deny instead of taking our medicine and getting on with recovery.