Years ago when I was a rookie employee at GE, fresh out of college, I was introduced to GE Interest Plus, offering a checking account with a competitive interest rate. I began saving my money there without realizing that this really wasn't a regular bank account. It wasn't their fault, the fact that they weren't a standard bank and therefore not FDIC-insured was clearly stated, it just took some time for me to realize that. By putting money in that account, I was really investing in GE's short-term debt and accepting a slight risk of loss.
There risk was not being FDIC-insured, but GE had top credit ratings from Moody's and S&P and that gave some assurance that the invested money wouldn't just vanish. GE Interest Plus's Web site proudly displayed their perfect credit rating.
Fast-forward a few years and it turns out that the credit-rating agencies really weren't adding much value. Many companies or investments that were deemed safe by these agencies either went bankrupt or had severe losses. The agencies may have sustained credibility damage but they still persist. What else is there?
Last Friday GE and Berkshire Hathaway had their credit ratings downgraded by a notch. They are still considered safe but not first-rate. GE Interest Plus updated their credit ratings statement to reflect the change and below is snapshots of their before and after ratings statements. Could be a while before GE's credit rating is back on top again.
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