Wednesday, February 6, 2008

Credit rating agencies’ role in the credit crisis

The great credit rating scandal

One group has been especially culpable when it comes to the current market mess: the credit rating agencies. How was the ratings system abused? And what does this debacle mean for all of us?

Posted by mary @ 12:41 PM (717 views)
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4 thoughts on “Credit rating agencies’ role in the credit crisis

  • Great article for a relative layman like myself – as always with Moneyweek.

    Why was the whole credit rating issue allowed to happen? – I think this passage sums it up neatly –

    “The structured finance bond issuance production line offered fat fees to bond underwriters (the investment banks) and to the rating agencies. Moody’s alone earned nearly US$1 billion a year from rating structured finance issues in 2005 and 2006, dwarfing revenues from the more traditional activity of rating government, municipal and corporate bonds.”

    Short term greed will ALWAYS overrule long term concerns.

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  • The fsa have stuck their hands up and said they made mistakes with NR. I bet they managed to off-load any shares they might have had before it went tits-up though… No-one at a level that had any real influence had sufficient desire to slow down the gravy train….

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  • Great article.
    “Ironically, rate cuts may impede the return to normality by hurting savers and forcing them to save more for longer, thus dragging out the downturn.”
    As in Japan…

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  • When people retire from Rating Agencies, they take up supervisory positions in monoline insurers.
    You can only get monoline insurance if you have a credit rating.

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