The big three credit rating agencies are said to...
The decisions of the "Big Three" catalyze market moves in often unpredictable ways, creating a strong ripple effect.
Yet these credit rating agencies have investors all over the world looking to them for years (and decades) for credit rating information...
Investors across the world look to credit rating agencies to judge where to place their bets in the market. For governments, the ratings agencies have a lot of power over the popularity of bonds: cash given to governments by investors that, over time, will pay a return on the original investment -- unless the government defaults. The downgrade of Ireland this week signaled Moody's belief that Ireland has a higher likelihood to default on investments. And global investors have little appetite to invest in those bonds.
Credit ratings agencies gave AAA ratings to bad assets were at the heart of the 2008 financial crisis...
At 2 mins - "These are the guys who gave AAA ratings to mortgages that were toxic" (about Standard and Poor)...
In the financial world... the fox is always guarding the chicken coop...
Notes: The big 3 - S&P, Moody's and Finch - are the main cause of the 2008 financial meltdown. - 2. They get paid by private companies for private ratings! clear contradiction of interest, especially when a private company is exerting influence on any economy (much less a global economy).
Having a business monitor it's own dealings is like having a feudal lord monitoring his own peasant farmers. Or as Senator Bernie Sanders calls it, "The Fox Guarding The Henhouse"
The New York Times Washington bureau chief discusses S&P's defense, private bank suits and the AIG bailout...
An ex-credit agency guy says:
Harrington, who worked at Moody's for 11 years until he resigned last year, said ratings agencies suffer from a conflict of interest because they are paid by the banks and companies they are supposed to rate objectively.
Financial Crisis 2008 In A Nutshell...
Best part is that the 700 billion, no questions asked, TARP bailout was just the tip of the iceberg as the Federal Reserve (again playing God with the US economy) gave out an additional 16 trillion to their close buddies. Notice that the Federal Reserve is a private bank and thus has no oversight. They can do whatever they want to the economy and NEVER have to face elections for this actions, i.e. no consequences! If you have access to a money printing machine and couldn't get in trouble no matter what you did, would you print yourself up some cash? If you could give this money away with no consequences would you give some to your friends? It's just paper, after all.
Credit rating agencies have way too much power given their lack of credibility to any reasonable person (i.e. they sold AAA rating status)
But beyond the rights and wrongs of this row lie deeper questions of how much trust should be placed in credit rating agencies and whether the influence they have over sovereign debt markets needs to be curbed. Politicians are right to fear the agencies' red pens. A downgrade sends up the cost of borrowing and can plunge nations deeper into a spiral of indebtedness. The Greek debt crisis laid bare the immense, and some would say unwarranted, power that they wield. Unsurprisingly, the big three – S&P, Moody's and Fitch – have come under fire, with Germany and France calling for their wings to be clipped.
Credit agencies operate in the obscure backwaters of the financial system, but played a major role in the meltdown.
Moody's, Standard & Poor's and Fitch, the world's biggest agencies, have been criticised by the EU and by high-deficit countries for exacerbating the crisis, as a downgrade fuels investors' fears about the ability of any debtor to repay its loans. The discussion started when Greece was downgraded at the height of the market turbulence this year that ultimately pushed the country into a bailout programme.
Ireland's cut, which puts it on the same level as Russia and Lithuania, pushes up its borrowing costs – a burden that a country already in the midst of draconian budget cuts can ill-afford.
The ratings agencies received widespread criticism for their role in the financial crisis after giving AAA ratings to investments made up of sub-prime home loans that subsequently imploded. S&P attracted more heat in August when it downgraded the US's debt. A move that US treasury secretary Tim Geithner said showed "terrible judgement".
The SEC is weighing action over a particular CDO known as Delphinus CDO 2007-1, which was singled out as a "striking example" of what went wrong in the credit crisis by the Senate committee report Wall Street and the Financial Crisis, published in April.
The $1.6bn (£1bn) CDO was downgraded a few months after AAA ratings were issued by both S&P and rival Moody's. The ratings agencies awarded tranches of the investment their top grade in July and August of 2007 but had begun downgrading them by the end of the year, "and by the end of 2008, had fully downgraded its AAA-rated securities to junk status," according to the report.
German government had to actually seek assurances that the credit agencies wouldn't interfere with the tough economic problem the Europeans have:
"German government sources said they had received assurances from the international ratings agencies that they would not rush to judgment in declaring a Greek default but would take their time in studying whatever finally emerged and for it to impact on Greece's private creditors." .
And eventually getting the rating agencies away from meddling in economies has been written into a new plan...
"14 Reduce reliance on non-European credit rating agencies"
Context: America's Next TARP Model
A Bloomberg report reveals that the U.S. government loaned banks $7.7 trillion in secret bailout funds at no interest and then borrowed the money back at interest.
'Basically the banks were being lent money at no interest (by the government) and then the government was borrowing it back and giving interest!' What a sweet deal!... Why is the US so low on the corruption charts? Who makes these charts? [A Bloomberg report [ http://www.bloomberg.com/