When rating agencies do their job… everyone panics.

Posted on July 7, 2011 by

In my Financial Times this morning was the following article:

Brussels launches attack on Moody’s

Senior European officials lashed out at Moody’s on Wednesday, questioning the timing of the debt rating agency’s downgrade of Portuguese bonds this week and threatening regulatory action against all three major rating agencies.

The criticism follows long- simmering European complaints about Moody’s and its two competitors, Standard & Poor’s and Fitch, centering on whether they have improperly attempted to influence policy-making in the ongoing debt crisis.

The Portuguese downgrade of four notches to “junk” status, comes amid a heated debate over how hard to push private owners of Greek debt to allow Athens to delay repayments. It also rekindled fears of the debt crisis spreading to bigger European economies.

Things are looking are down everywhere, and European leaders are beginning to demand that the (American) Big Three rating agencies be split up or replaced with a European alternative. Also, they contemplate simply refusing ratings for their products.

All European countries are now seen as a greater risk of default, and the banksters are angry. In truth, the rating agencies have not downgraded them enough. Some are already in default, and should therefore be labeled “D”.