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The Credit Agencies Strike Again

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News has just come through that Italy, Like America before them, has taken a hit from Moody’s – one of the big three

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News has just come through that Italy, Like America before them, has taken a hit from Moody’s

credit agencies – and been downgraded from Aa2 to A2. What does this mean? Well, as Robert Peston, the BBC’s Business editor clearly pointed out in a recent article, “If Italy is looking like a more risky place to lend, its banks… will find it harder and more expensive to borrow. The [/fusion_builder_column][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][eurozone] banking crisis will be exacerbated,” and quite simply, “This couldn’t have come at a worse time for the eurozone.”

Although this downgrade isn’t exactly a surprise, it raises, of course, concerns that Spain may be next and that the dithering and disorganization of the eurozone in dealing with it’s debt problems will just continue to make the situation worse.

One bit of news that has run concurrently with the aforementioned is that the credit rating agencies themselves have been “wrist-slapped” for conflict of interests by the Securities and Exchange Commission (SEC) recently. Since America’s downgrade earlier this year, credit agencies like Standard & Poor and Moody’s have taken on an omniscient God-like stature in regards the “health” of countries and their financial outlook. Not anymore. In a damning piece recently in the BBC, it was said that the credit agencies were “not making timely and accurate disclosures or managing conflicts of interest.” What were those “conflicts of interest?”, you ask? Well, quite simply, the agencies were being paid by the banks that sold the bad mortgage debt around the globe in the first place – a key cause of the financial crisis – and still the banks maintained top ratings at the time. The SEC has firmly said that this situation has to change with the agencies. Now, it seems that the official watchdog has a new watchdog, once again highlighting the current dilemma of “who can you trust?”[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

 
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William R. Feins , freelance journalist from London, UK; he received his B.A. degree in Economics and his Masters in Sociology. William has always been interested in the mechanics of business and the inspiration of original thinkers, and firmly believes that the former can’t succeed without the latter. In his spare time, he enjoys the ridiculous spectacle of watching table tennis on a big screen (preferably at a pub) and reading weighty tomes about World War II.

19 COMMENTS

  1. One action will have an opposit reaction and the consequences. When the consequences hit hard one has to calculate well before proceeding ahead and consider altrism and a step of compromising positively. Otherwise those who pay dearly are the common citizens

     
  2. I feel like it’s going to be a sort of domino effect. One country, then the next, then the next… It’s a scary thought, it really is and especially for the rest f us in Europe.

     
  3. Well, that’s not good news. The euro zone will have bank crisis, which will definitely affect the economic of the european union. This is not a surprise all the world is suffering from the crisis which I think is made by people who think of them self. Every action has an opposite reaction.

     
  4. The credit industry is really being more and more stiff lately. Even the powerful nations, the ones considered to be part of the first world, are being affected by it. Hence, it is only a matter of time until they gain confidence again and try to take matters into their own hands in the industry.

     
  5. This is not a good time in the crisis of Euro zone. Imagine a debt that has an interest by bank which they need to raise, just to give a commission to another agencies. It is more like a burden with lots of layer in it. And of course those who cannot handle this will be the victim!

     
  6. This is definitely not a healthy scenario that these countries and nations are experiencing. The effect is going to come snowballing, and others will definitely follow. Usually, the credit industry can be the strongest basis for the financial status of a country, and this clearly shows how dangerous times are for these countries.

     
  7. That is bad news! now isn’t nice time for that. that will effect to many country. Effecting to economy, society, bussiness, etc… it will make the crisis to all world. thank about new

     
  8. Why the bad banks can still get the high ranking in the financial system is the main problem and main cause for recession. Borrowing more and more money should decrease the credit of bank. However, with little help from the debt selling companies, it would be not hard to maintain high ranking. Every one who see the record of bank would be surprised its clear background of debt. But, what if no one can afford the debt ? Then that goes the recession and pull all of banks into the hole. That’s why recession is so powerful. But its attack would distinguish who is bad ? who is good. It attacks everyone.

     
  9. credit industry has a stinky reputation as the economy fall and so they do the opposite as they keep the interest high. So n this time of global crisis i would not commit to get a credit card or involve n high debt investment using credit. I doubt the people who gain are the credit company and n the losing end are the clients. So in order t have a peace of mind better to avoid getting a credit.

     
  10. Recession and debt is worry for all but what to say people have to step in right direction without getting feared with all these. The crisis in the bank will need to be resolve and a good decision is required. Why can’t we strengthen the financial system to make the bank strong and committed. It is duty of the government to make such decision to keep the debt away but how god knows?

     
  11. With the downfall of economy in almost every part of the world. The government should imposed strict regulation for many credit company to follow. They need to be wary of the law so they would not impose high rates on credit.Private company and bank are guilty of this as they abuse the system and expect to gan rather than ease the burden.

     
  12. Another country’s rating goes down.The world is not yet out from the the crisis that started back in 2008.It is going to affect not only europe and americas but also other developing countries as well,including the fast developing countries like India and china.

     
  13. hmmm, if it is one of the cause of their suffering then they should do something about it. They should not stand and watch them beaten for the second time around. If they want to survive this ongoing crisis, then be vigilant to get rid of this root cause.

     
  14. You mean also Italy! My goodness, if Italy is looking like a more risky place to lend, then it banks will find it harder and more expensive to borrow! What a real frustrating news in the banking world! I’m afraid something worse than this is yet to come.

     
  15. Hmm. Rather interesting. This is extremely well written and very informative. Thank you for writing this. The information shown in here really helped me to expand my knowledge of the world. You are a rather talented writer!

     
  16. It is not good any of the company to be degraded as it takes years to have repute. Such crisis destroys the company and let their business down. Disappointed it is!

     
  17. Euro zone is already facing lots of financial crises and any unconditional step will only bring more difficulties, the credit agencies have to understand the situation before making any thought decision. Euro Zone is already begging help from other Nations, Euro currency will itself end with this uncontrolled crises and unhealthy financial steps.

     
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