ACCUSATIONS MADE by a new Chinese credit agency that western counterparts caused the financial crisis were rejected by the head of McGraw-Hill Companies, which owns Standard & Poor’s.

Harold “Terry” McGraw III, chairman and chief executive, said global rating agencies S&P, Moody’s and Fitch were being unfairly targeted by politicians, commentators and competitors all over the world.

“If you’re in a populist mood, you’ve got to find the villain,” said Mr McGraw. He was reacting in part to criticism from the head of China’s largest home-grown rating agency.

Guan Jianzhong, chairman of Dagong Global Credit Rating, said that “the financial crisis was caused because [western] rating agencies didn’t properly disclose risk”.

Some US politicians have described the credit rating industry as a “bone-chilling definition of corruption”, but Mr McGraw said his company’s only contribution to the crisis was to make honest, technical mistakes.

“A couple of assumptions we made didn’t work out and we just totally missed on the US housing recession,” he admitted.

However, Mr McGraw said he thought S&P would come out of the current period “bigger, better and stronger because of it. Look at the accounting industry in the immediate post-Enron period – today it is as strong if not stronger than it ever was.”

Mr Guan accused his western competitors of being “politicised and highly ideological”.

Mr McGraw responded to these comments by recalling the reaction in Japan in the mid-1980s when S&P downgraded Japanese banks for making risky loans. “Oh man, it was the war again. The government got involved and said it was a threat to national security and they planned to start their own agencies,” Mr McGraw said.

“But in selling those securities, once you go outside your own borders, nobody’s going to listen to that, nobody’s going to listen to a Japanese government-led opinion that they’re double A.”

Mr McGraw said China’s Dagong agency would have “to stand on its own”, by publishing its policies, procedures and putting out assumptions and criteria in a transparent way. “I haven’t seen that much on the analysis part.”

Dagong recently published its own sovereign credit ranking, in what it said was a first for a non-western rating agency.

In stark contrast with the assessments of other agencies, Dagong ranked China as more politically and economically stable than the US, Britain, Japan, France and most other major economies. Mr Guan said governments should play a bigger role in credit-rating decisions, a proposal Mr McGraw emphatically rejects. – (Copyright The Financial Times Ltd 2010)