Raters fail to see defaults coming

The major credit-ratings firms have historically not been effective predictors of a government's risk of defaulting on its debt

The nation's major credit-ratings firms have historically not been effective predictors of a government's risk of defaulting on its debt, according to a Wall Street Journal analysis of 35 years of data.

Standard & Poor's Corp.'s downgrade late Friday of US debt to AA+ from triple-A has highlighted a key role of credit-rating firms: helping investors measure the likelihood of default so they can calculate the appropriate rate of interest to charge on bonds.

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