Roubini : Alternatives to Credit Ratings Agencies already Available | NOURIEL ROUBINI BLOG

Wednesday, August 12, 2015

Roubini : Alternatives to Credit Ratings Agencies already Available

In an op-ed, Professor Nouriel Roubini explains why rating agencies are not equipped to spot the dangers hidden in a shifting global economic scene.

No one said setting up an early warning system for a global financial storm was easy. Among those blamed for failing to spot the 2008 subprime crisis are senior politicians, the world’s biggest banks and several supranational institutions.

However, with the US Federal Reserve and Bank of England likely to raise interest rates, China’s growth slowing and commodity prices falling, we need an effective way to spot the gathering clouds now as much as ever. For many, that means turning to credit rating agencies — despite the fact that they failed to detect signs of crisis on the horizon in the last decade.

Credit rating agencies matter. These private companies assess the ability of debtors, including countries, to repay. Because regulators often defer to their assessments of the risk inherent in holding a particular asset, they in effect dictate what investors can invest in, and how much.

Read full article as published in Financial Times

Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics

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Nouriel Roubini, (born March 29, 1958, Istanbul, Turkey), Turkish-born American economist and educator who was best known for predicting the 2007–08 subprime mortgage crisis in the United States and the subsequent global financial crisis.

Born to Iranian Jewish parents, Roubini moved with his family to Iran and Israel before they settled in Italy in 1962. After a year at Hebrew University of Jerusalem, he studied economics at Bocconi University in Milan (B.A., 1982) and Harvard University (Ph.D., 1988), where he specialized in macroeconomics and international economics. He joined the economics faculty at Yale University in 1988 and taught there until 1995, when he moved to New York University. He also served as a visiting scholar to the International Monetary Fund (IMF), was a research associate with the National Bureau of Economic Research (NBER), held single-year terms on the White House Council of Economic Advisers (1998–99) and at the U.S. Department of the Treasury (1999–2000), and cofounded (2004) the consulting firm Roubini Global Economics. Roubini spent much of his early career studying countries that experienced extreme economic failures, such as Mexico (in 1994), Thailand and other countries associated with the 1997 Asian financial crisis, Russia (1998), and Argentina (2000). He determined that each shared one common element: a massive current account deficit.(www.britannica.com)

Nouriel Roubini is the Chairman and CEO of Roubini Macro Associates, LLC, his own global macroeconomic consultancy firm. He is also a professor of economics at New York University’s Stern School of Business. Dr. Roubini has extensive policy experience as well as broad academic credentials. From 1998 to 2000, he served as the senior economist for international affairs on the White House Council of Economic Advisors and then the senior advisor to the undersecretary for international affairs at the U.S. Treasury Department, helping to resolve the Asian and global financial crises, among other issues. The International Monetary Fund, the World Bank and numerous other prominent public and private institutions have drawn upon his consulting expertise.