Rating The Credit Rating Agencies?

Standard

Perhaps, when one first saw the government news that it was “questioning” credit rating agency behavior, one might have thought it was “tit for tat”. Standard & Poors had said: US unlikely to regain AAA rating soonThat may very well have been a good faith statement, but perhaps that may not have gone far enough. Perhaps S&P should have rated its own performance in the credit rating activity. Telling America’s current events news pool why  it gave AAA ratings the way it did may have helped. It looks like those AAA ratings were given to securities that went “belly-up”.

This news story is carried  by BBC News:

S&P tried to defraud investors says US Justice Department

Here is part of what Attorney General Eric Holder announced:

‘Concealment of material facts’

S&P and other ratings agencies have faced criticism from investors, politicians and regulators for assigning their top AAA ratings to thousands of sub-prime and other mortgage securities that later collapsed in value.[…]

[…] The ratings agencies’ job was to assess the likelihood that the home loans – and therefore the CDOs – would ultimately be repaid. Their ratings enabled the investment banks which put the CDOs together to then sell them to investors around the world.

The Justice Department claimed that S&P turned a blind eye to the risk inherent in these products, and assigned them ratings that were too high, because the ratings agency wanted to encourage investors to buy more CDOs so that they could earn more fees.[…]

Now take a look at the bold text “sell them to investors around the world”. Does not that remind you of this title, Eurozone crisis explained? After reading that post you might think that each Western country caused its own recession. But if investors around the world could have included some in  Greece, Spain and  Italy then maybe  there is a relationship.

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