Controller Malia warns against politicizing credit ratings, urges agencies to resist external pressure

In a joint letter sent to the leaders of Fitch Ratings, Moody’s Corporation, and S&P Global Ratings, Controller Cohen and seven other state and local fiscal officers demanded the agencies preserve their independent, forward-looking credit methodologies in the face of external efforts to narrow risk analysis. “We are concerned that recent arguments regarding credit rating practices mischaracterize the role of ratings and would narrow risk analysis in ways inconsistent with sound credit practice and the needs of investors and issuers,” the officers state in the letter.

“Credit ratings are intended to assess the ability to meet financial obligations over time,” the fiscal officers write. “That responsibility necessarily requires consideration of forward-looking factors, including changing market conditions, policy environments, and long-term structural trends.”

The fiscal stewards caution that constraining rating agencies from considering emerging risks would directly harm state fiscal health. Limiting analysis to fully realized developments would diminish the usefulness of ratings as early indicators of risk, increasing costs for public issuers and reducing resources available for infrastructure, education, and public services.

According to Controller Cohen, “Credit ratings are not political endorsements, they are financial risk assessments. When outside interests attempt to dictate what risks can or cannot be considered, they threaten the integrity of the rating process and the confidence investors place in our markets. States and local governments depend on fair, independent credit analysis to finance schools, infrastructure, public safety, and other essential services. Politicizing that process would make borrowing more expensive and leave taxpayers footing the bill.”