Friday, December 17, 2010

Who Cares What Moodys Says?

Moodys just downgraded Ireland's credit rating by 5 stars (now Baa1 - is that funny to anyone else?). So why should anyone care what Moodys says?
As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.

A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings.

Instead, Moody's promoted executives who headed its "structured finance" division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now: "toxic assets."

... "How on earth could a bond issue be AAA one day and junk the next unless something spectacularly stupid has taken place? But maybe it was something spectacularly dishonest, like taking that colossal amount of fees in return for doing what Lehman and the rest wanted," McDonald wrote.

Isn't it interesting that Ireland just took up a big IMF loan and THEN got downgraded? Parliament approved an 85 billion euro EU/IMF bailout package just two days ago.

Now this Moodys downgrade is gonna make paying back that IMF loan harder, obviously. The Irish government might even have to make some deals with Uncle Sam... Psst! You wanna buy some arms, Paddy?

The economic hitmen strike again. Ireland has been pwned. No wonder people on the Emerald Isle think they have a puppet government. But who is pulling the strings?

h/t @Marketmentat who was onto Moodys years ago.

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