I have been following the developments in Greece with some interest to find out what is really going on with this whole European crisis. I must say it is a very sad thing to watch. It’s really sad to see a country going down because of its financial rating. Now, what I just want to talk about is the financial ratings that have seen Greece go down.
Disclaimer: I am not some great financial advisor nor do I have a qualification in the area of finances. I just feel something is wrong and I want o express myself. Thank you.
I must say, there is something funny about this whole issue of ratings agencies and the power they wield and that is why I want to talk about Moody’s. Over the past month Moody’s has gone about its business in a way that makes me feel that something should be done about the issue of rating financial investments especially when it comes to the security of countries
Rating agencies like Moody’s are there to help investors who do not have the resources to investigate into certain investment products to make informed choices based on the rating that are giving it my these agencies. Investors should be able to make good investment decisions by following the rating giving. Moody’s is part of the three biggest rating agencies and commands around a 40% market share in this market and wields a lot of power. This kind of power is even stronger in a market that is driven in a large part by speculations. The worth of companies could fall overnight if it ratings go down and vice versa. When a ratings agency like Moody’s lowers the ratings of an investment the market listens and pulls out of that investment driving that very investment to loose a lot of value.
Political leaders in Greece have made very wrong decisions in the past that have cost their country dearly and put them in debt that they are finding difficult to repay. For their current financial situations I would totally blame the politicians who messed up their economy but what Moody’s did to was unacceptable. I fully understand that they have to warn investors when investments are going sour but I believe they are being partial. Their decision to reduce the ratings of Greece has only succeeded in deepening the problems the Greece are facing in paying their debt. Why would I accuse them of being partial? Well we all know the global financial crisis that happened recently and which most of the world is still recovering from, well what was Moody’s doing when they knew very well that US government bonds were just junk but they seemed to have forgotten about their rating standards. When it came to Greece they realized that they had standards to follow.
They (Moody’s) recently announced that they were considering downgrading US government bonds I found that really funny that they would talk about CONSIDERING. If something is bad you don’t consider you just go ahead and down grade it. You can’t sit down and consider if it’s no good, just downgrade it. This whole issue of CONSIDERING bothers me and makes me doubt the credibility of Moody’s.
It is one thing downgrading a company and another thing downgrading government bonds. When Moody’s were making their decision on Greece they didn’t seem to care about the kind of impact it would have on their economy this is why I mentioned “the security of countries”. It is just unsafe for nations to be rated by organizations like Moody’s who are much more of arrogant than friendly. Their ratings could have given Greece a better fighting chance considering the fact that their current leaders had shown their commitment to make decisions to pay of their debts.
Personally I am happy that the European Union is planning on creating a rival ratings agency that would serve as an alternative to the American agencies like Moody’s. Their careless action that has only deepened the crisis in Greece really got the European Union angry and would help the financial industry as a whole. If Moody’s were that good at ratings they could have seen the financial crisis coming and warned investors about US government bonds. I think it is wiser and safer for all major regional blocks to have similar structures to protect them from companies like Moody’s. Moody’s have no moral right to do what they did.
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