From bad eggs and black gums to “AA-”, outlook stable
Credit ratings agency Fitch has downgraded Ireland’s sovereign debt two notches from “AA+” to “AA-”, issuing a press release that made use of such charming finance-speak as ”fiscal consolidation”, “dynamism in the large, high value added and diverse export sector” and “the outlook on the long-term IDR is stable”. But it wasn’t always this way.
Back in 19th century, credit reports were a lot more interesting to read, as the historian Scott A. Sandage recounts in his 2005 book Born Losers: A History of Failure in America. “Not worth the powder to kill him,” read one early report on an Alabama trader. Meanwhile, a Philadelphia business owner is deemed “rather too magnificent in his plans and projects” and later becomes a lowly clerk , while another Manhattan entrepreneur is branded “as tight as the bark on a black gum”.
According to Sandage, few cases were as clear-cut as this 1862 report: “The whole lot of Weatherbys are Bad Eggs.” Bad egg was newly hatched American slang in 1862, “typical of the commodity talk that made credit reports both understandable and concise”. Because goods were delivered by railroads, telling fresh from stale was not easy. ”A bad egg was a market commodity that turned out to be worthless, an apt metaphor for gauging a trader’s current and future value,” he writes.
Eventually, all-purpose epithets like “good for nothing” were replaced with something akin to the current system. “Rated A no. I”, derived from naval and insurance classifications, meant the person was good for unlimited credit. But these “big red books” still loved nothing more than swipes and quips. The owner of the Black Bear Tavern in Cincinnati, according to an 1854 credit report, “has prop[erty], ought to make money, but is dissipated, vacillating, wasteful at times…” Some men were too fickle to be bankable commodities.
A century and a half before the likes of Fitch, Standard & Poor’s and Moody’s were busy giving ”AAA” ratings to the toxic confections that were securitised subprime mortgages, their predecessors were never shy about giving potential business failures the “worthless” tag: “worthless and always will be”, “worthless and contemptible”, “worthless cuss, never was worth anything” and “worthless but still here” were among the choice insults. If only Fitch’s earlier decrees about the creditworthiness of the Irish economy had reflected this 1856 entry from Georgia: “in good credit now but hard times might blow them over.”
Sandage’s book notes that the early credit ledgers introduced “new vocabularies” of success and failure to railroad-era America. “Loser was once a neutral word for anybody who lost property, often by theft or natural disaster,” he says. By acting like moral policemen, the credit ratings agencies changed that. These days, it seems like we’ve come full circle. The rewards-for-failure culture means there are no real losers among the financial services elite. Why bother indulging in a sense of personal shame when you can keep bonuses for executives and lay off junior staff instead?
