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The chapter discusses three myths that underlie current conceptualizations of money, credit, and creditworthiness. The first --that money is fungible--describes it as a neutral means of accounting for value, and a quantitative metric to compare qualitatively different commodities. The myth of banks as institutions of intermediation defines them as organizations charged with the allocation and distribution of scarce financial resources (capital). Finally, the myth of creditworthiness as objective assessment understands the criteria by which borrowers are granted credit as a function of the traits of the borrower: the better these criteria capture such underlying traits, the better the odds that the financial obligation will be met in the future. Each of these myths ignores how money, credit, and creditworthiness are always contested, with certain bankers striving to reinforce the boundaries drawn around each phenomenon, while other bankers strive to transgress those boundaries.

This chapter discusses the case of the United States in the 19th century, as part of a more general investigation of how the boundaries that define creditworthiness are delineated in democratic regimes. At the time, the creditworthiness of U.S. citizens was assessed and conceptualized on an individual basis, but this was a political construction, deriving from the nature of the polity, which was decentralized. As a consequence of political decentralization, and specifically fiscal decentralization, bankers strived to gain the support of local political authorities to construct boundaries around the allocation of credit which could be attached to sound banking. In the states of the North, where state governments were democratic, this dynamic was very different than in the states of the South, where relationships between banks and state authorities, relationships grounded in the slave economy, were more exclusionary.

This chapter studies the making of sovereign ratings, i.e. ratings about the creditworthiness of states, and underlines some of their economic and political effects. The rating companies’ market is oligopolistic and composed mainly of three large firms, Standard & Poor’s, Moody’s, and Fitch. This chapter shows the convergence of opinions about the willingness of states to reimburse their debts and their willingness to do so. Rating agencies are rather conservative, i.e. they tend not to change their ratings too frequently. This creates an environment of stability. As in the case of modernization theory (chapter 3), this favors inertia. In some cases, Credit ratings agencies prolong the present and delay the future. This happens when they don’t change their ratings of countries that face significant financial problems. In turn, investors are not dissuaded from disinvesting from these countries, thereby delaying national defaults.