Waiting To Be Pawned Off?

Where were Standard & Poor’s, Moodys, Fitch and the other smaller credit rating agencies in 2006-2008 when Goldman Sachs, WaMu, Merrill Lynch, Bear Stearns and so many other investment and retail banks were peddling junk grade mortgage backed securities?

Why wasn’t the credit rating system being used effectively back then to highlight the exceptionally risky CDOs and MBSs before they almost brought down the global financial system? These credit rating agencies could have prevent some of the collapse, by downgrading AIG’s bond ratings, for instance, before the massive collapse.

They were responsible for the Great Recession just as much as the banks. Far from being dependable, their ratings are a mere re-statement of what the companies are saying themselves:

The rating agencies don’t do any factual verification, they just assume the accuracy of the information given them by the issuer, which becomes a self-fulfilling prophecy

Heck, they…

…even gave Lehman Brother’s an investment grade A rating one month before its collapse.

Yet, when it comes to destroying the debt ratings of entire countries and non-financial sector companies, the rating agencies are more than eager to play the hand of God.

Just today, S&P lowered Greece’s bond rating to BB+, which equates to junk or non-investment status. This is only going to make it even more difficult for Greece to borrow at a time when it desperately needs to borrow. The EU is going to bail-out Greece, and even Germany is on board, which makes it highly unlikely that it will default on its loans or fail to raise the necessary funds.

This is why the power of these credit rating agencies is immoral and wrong, and needs to diminished – they help their friends on Wall Street, while flipping off Main Street in broad daylight.

Where is Obama’s regulation-friendliness when you need it, eh?