Prosecutors in Italy are attempting to take seven workers from Standard & Poor’s and Fitch rating agencies to trial for “alleged market manipulation and abuse of privileged information.”  The Italian magistrates have yet to rule on whether the case can move forward.  If it does, this could have an effect on the way that rating agencies act, and what duties they, as private entities, owe to the governments they express credit-worthiness about.

Credit agencies have been coming under attack recently for actions they have taken before and after the financial meltdown.  Last year, when the United States lost its AAA rating, the Obama administration was quick in its attempt to discredit the reliability of the methods Standard & Poor’s used in determining its ratings.  European policymakers have also complained that the European Union did not deserve the downgrades that it received, and former Italian Prime Minister Silvio Berlusconi has spoken out against a “political agenda” behind the rating agencies’ motives.

It is reasonable to become upset with rating agencies and to speak out against them.  But ultimately, people must take responsibility for their own reliance on the ratings that credit rating agencies give.  The disclaimer of Standard & Poor’s does a good job of summing up its position in the world of finance:

Any credit-related analyses, including ratings, or statements used in  any of the Content are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities or to make any investment decisions…. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions.

If the Italian courts decide to hear this case, it would not be the first of its kind. Indeed, an Australian court recently ruled that Standard & Poor’s misled investors by giving good ratings to bonds that ultimately failed in the fiscal meltdown.

But it must be recognized that to take legal action against credit rating agencies is entirely different than merely expressing an opinion about the soundness of their judgments.  Allowing this Italian court proceeding to move forward would effectively pronounce that in the future credit rating agencies could owe a higher duty to investors and to the entities that they rate.  This could change the relationship that credit rating agencies have to the governments they rate, and ultimately compromise the independent judgment that they are able to offer.  It remains to be seen whether the Italian courts will allow this to happen.

For more information:

http://www.reuters.com/article/2012/11/12/us-italy-ratings-probe-idUSBRE8AB0QO20121112

http://www.standardandpoors.com/regulatory-affairs/indices/en/us

http://minnesota.publicradio.org/features/npr.php?id=139038131

A recent Italian law made headlines this past week that aims to tackle corruption and to repair the Italian government’s image after the widely criticized Berlusconi administration.  Prime Minister Mario Monti made it a priority to fast track the bill through both houses in the legislature.  The bill, which was ironically drafted during the Berlusconi administration, languished in Parliament limbo for two years before being passed through both the Upper House and the Chamber of Deputies.

The law broadens the definition of corruption by making influence peddling a crime.  Campaign financing also has to be more transparent and open to public record. It also provides longer criminal sentences for public officials who demand bribes and protects whistle blowers by guaranteeing anonymity.  The last hurdle the law faced was determining if a past conviction of corruption barred a public official for running for reelection, which the bill did end up also prohibiting.

The Berlusconi administration and its exit marked the pinnacle of nearly two decades of corruption within the Italian government.  Except for Greece, Italy was ranked as the most corrupt European government by Transparency International’s global corruption ranking in 2011.  The law, which passed 228 – 33 in the Upper House, signals a new direction the government is taking to commit itself to transparency and being legitimate in the eyes of the Italian electorate and externally to the world.  The Italian people strongly supported the measure by sponsoring a petition with 300,000 plus signatures advocating for its passage.

Despite the strong support for the law and the stronger measures it provides to tackle corruption, various critics have described the bill as not strong enough in tackling what many consider to be a national emergency of corruption.  While the bill cannot be expected to correct what has been in place for nearly two decades, the bill marks a promising new step not only by the government but also from the Italian people.  It provides a legal framework that makes it easier to prosecute bribery in a culture where cronyism and bribery had become the norm.  Ultimately, the bill’s success relies on its enforcement and the government’s ability and readiness to prosecute those who violate it.  The next few years will be telling in discovering if the government is serious in taking a new step towards repairing the tarnished image of government left by its disgraced former prime minister.

In 1989, Carlo Petrini founded the Slow Food movement to counter the opening of McDonalds in Piazza Spagna in Rome and the general rise of fast food  in the world.  The organization seeks to prevent large, multinational chains from detracting from small businesses and local agriculture.  Since 1900, up to 75% of European food product diversity has been lost and over 90% of American food product diversity has been lost during the same period.  One study has shown that one vegetable variety is lost every six hours.

Just this past week, Turin was host to the Salone del Gusto and Terra Madre, a biennial international fair that focused on raising awareness to the Slow Food movement.  The Salone del Gusto and Terra Madre is a venue where food communities from around the globe join together to provide a sense of hope and enthusiasm for the future of food and farming.  This year, the event attracted over 220,000 people over the course of five days. Over sixty percent of the tickets were sold to visitors from outside Italy.  Organizers saw that this was proof that despite the poor economy, the vision of Petrini is still real and strong.

The event centered on a series of conferences that looked to foster debate and ideas relating to sustainable production and consumption.  In addition to the more formal debates, there were a number of events that were geared towards children.  In addition to the workshops, vendors, and conferences, this weekend also featured the International Congress of Slow Food.  650 delegates from 90 countries met to determine the future of the movement.  While the direction of the movement is uncertain, the future is strong and interest is certainly ever-present.