Should the world trust a downgrade of the credit rating of the United States from a credit rating agency that helped put America into its current financial condition by giving prime credit ratings to bundles of subprime debt trading instruments? The implosion of the mortgage backed security trading business wrecked the economy.
Now one of the credit rating agencies downgrades the AAA rating of the United States citing the political climate as one of the reasons. Excuse me, aren’t you the same guys that stamped your seal of approval on what turned out to be a near pyramid level debt instrument called Collateralized Debt Obligations consisting of bundled home loans both prime and sub-prime? When the dominoes fell, credit froze and jobs along with retirement accounts values melted away like butter. Some asked how these risky instruments earned the highest rating from agencies like Standard & Poors.
The United States Department of Justice is curious as well and so is the SEC. Now this credit rating agency seems to be acting out by not only downgrading the credit raring of the United States but also telegraphing other dire things that may come. Is this the big showdown? I will not just hold your credit rating hostage, but I will hurt you badly if you mess with me.
An article titled SEC investigates role of ratings agencies Moody's and Standard & Poor's aheadof the financial crisis August 7 by Richard Blackden details how the SEC is looking into the role of credit rating agencies in the mortgage backed security collapse.
Maybe the real question is, given the mortgage backed security credit rating debacle, when will the credibility and power given to the credit rating agencies be downgraded?