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View Full Version : Credit Rating Agencies the new bad guys?


Happybunny
Feb 14, 2012, 05:17 AM
Are they tools used by American banks to regulate the Worlds economy?

All three of the agencies got it stupendously wrong pre 2007-2008, with the sub prime, but walked away as if nothing had happened, how did that happen?

Who controls their evaluations?

Fazzy
Feb 14, 2012, 05:42 AM
America and Europe are just mad that the credit ratings are going downhill. The system always has been kind of unfair for the LEDCs (less economically developed countries) imho.

firestarter
Feb 14, 2012, 08:30 AM
Credit rating agencies are the old bad guys, but the new good guys.

If they'd have been doing their job correctly, they would have downrated collateralised debt in the lead up to the financial crisis a few years back... they didn't.

Now they're downrating countries with excessive debt (US) and also with an exposure to the Euro (because that's going to fail). Seems like they're actually doing their job correctly now.

Ugg
Feb 14, 2012, 09:28 AM
Fear of being sued seems to be their prime motivating factor in downgrading so many countries.

The real problem as firestarter states is collateralized debt. It's basically gamblers gambling on their previous gambles but unlike the stock market, there's no oversight. What should be downgraded are investment funds that have heavily invested in collateralized debt. The ratings agencies are once again afraid to do so.

barkomatic
Feb 14, 2012, 10:20 AM
These agencies should simply provide detailed reports on financial health -- not an actual rating. They are far to subject to political influences to ever be credible.

mcrain
Feb 14, 2012, 10:53 AM
Credit rating agencies are the old bad guys, but the new good guys.

If they'd have been doing their job correctly, they would have downrated collateralised debt in the lead up to the financial crisis a few years back... they didn't.

Now they're downrating countries with excessive debt (US) and also with an exposure to the Euro (because that's going to fail). Seems like they're actually doing their job correctly now.

Yes, they should have downrated the collaterilised debt. That much is true. But, they did NOT downrate the US because of its debt. The debt rating ONLY was downrated and/or questioned because of Republican opposition to paying our bills. We have NEVER defaulted, and we weren't going to default then, or anytime in the near future unless Republicans continued their obstructionism.

The downgrade was a commentary on a group of elected radicals holding our country and the world's economy hostage. The downgrade even said so.

To place the blame on the debt (which they also happen to share the majority of responsibility for) is false.

firestarter
Feb 14, 2012, 10:57 AM
To place the blame on the debt (which they also happen to share the majority of responsibility for) is false.

I wasn't making a party political point... I'm not a Democrat or Republican.

The US has too much debt with respect to its political will to deal with it (or even worse, your political system is 'not fit for purpose'). If you didn't have the debt, that wouldn't be a problem.

anyway...

The OP's point isn't about the US downgrade, it's about his inability to believe that the Euro will fail - and his choice of blaming that on ratings agencies, rather than European government.

mcrain
Feb 14, 2012, 11:10 AM
I wasn't making a party political point... I'm not a Democrat or Republican.

The US has too much debt with respect to its political will to deal with it (or even worse, your political system is 'not fit for purpose'). If you didn't have the debt, that wouldn't be a problem.

anyway...

The OP's point isn't about the US downgrade, it's about his inability to believe that the Euro will fail - and his choice of blaming that on ratings agencies, rather than European government.

I thought the OP was questioning the validity of the credit rating agencies in the first place when they have a history of being horribly wrong, unregulated and were somehow allowed to escape their past failures without any reparcussions.

As for the Euro, it may fail, or it may suffer as independent countries decide they won't bow to the banks demands for austerity when they finally realize that cutting during a recession is almost as smart as digging your way out of a hole.

Rodimus Prime
Feb 14, 2012, 11:51 AM
Fear of being sued seems to be their prime motivating factor in downgrading so many countries.

The real problem as firestarter states is collateralized debt. It's basically gamblers gambling on their previous gambles but unlike the stock market, there's no oversight. What should be downgraded are investment funds that have heavily invested in collateralized debt. The ratings agencies are once again afraid to do so.

Personally I think they should be sued for being a huge part of causing the melt down. They knew the things they were rating as AAA were not that good but they did not want to do anything because thy were making a killing putting those rating on the mortgage debts.