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Aikaterina
A Greek-American living in California
12:11 PM on 07/06/2011
The ratings agencies will sell a high grade for a higher fee. That's what they did in the US, which led to the financial implosion a few years ago.

Wall St. and banks paid high fees (who knows what other incentives were exchanged) to get those investment-grade ratings on products they knew were volatile and would become worthless (toxic) in short order.

That many firms (selling mortgage-backed funds) were hedging their bets against products they sold investors is a de-facto admission they were fully aware of the risks and ultimate devaluation.

Moody's, S&P, Fitch and others gave Lehman Bros., Bear-Stearns, AIG, etc. investment-grade ratings until they day they each collapsed. They rated high-risk funds as investment-grade, which duped governmental, institutional and private investors, who rely on their ratings.

In hearings, after the financial melt-down, those agencies claimed their ratings were merely "opinions," and not meant to be taken seriously, and were able to elude accountability for their role in the melt-down, much less their conspiracy, bribery and fruad.

Now, those same agencies are downgrading EU government debts, knowing this will create more financial hardship upon those governments: higher interest rates, hysteria amongst potential investors (who'll refrain from putting money into businesses or buying treasury notes).

It's not that the agencies have a bias against the EU, but that governments haven't paid them enough to buy or bribe them into giving investment-grade ranks on their notes.
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blueken
Finger Picking blues man
11:50 AM on 07/06/2011
The credit rating agencies will continue to view the Euro countries differently as long as they make decisions based on the welfare of it's people and not based on the welfare of the credit rating agencies employers, the international banking system. One must pay attention to which side of the bread one's butter is on.
02:28 PM on 07/06/2011
The downgrade, in fact, will discourage bailouts and encourage PIGS to default, preventing their future generations from becoming debt-slaves. Libs don't understand a thing. All they can do is hate banks and ratings agencies.
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blueken
Finger Picking blues man
04:21 PM on 07/06/2011
So you assume I have no investments, no business acumen, and that I am in debt and don't really understand economics. You base this on what? Cause it's all wrong.
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11:46 AM on 07/06/2011
These are the same agencies that missed the last crash, I don't understand why anyone still trusts their ratings.
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Aikaterina
A Greek-American living in California
12:14 PM on 07/06/2011
Those agencies didn't "miss" anything.

They were handsomely rewarded for their stellar investment-grade ratings, knowing the firms selling mortgage-backed funds were hedging their bets against them (an admission both ratings agencies and firms selling the funds knew those products were volatile and would become worthless-toxic in short order).

It's a classic situation of conspiracy, bribery, and fraud.
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J T K
Quis custodiet ipsos custodes?
04:49 PM on 07/06/2011
Because for better or worse there's no alternative. You need a way to rate credit risks and nobody's come up with a better system, or at least no company has one that's popular enough to really hit the mainstream yet.