What Moody's Delay In Downgrading Greece Says

Yesterday, Moody's Investment Service finally downgraded Greece's debt to junk status. To most, this was no surprise. But, to many more, the real question was why it took them so long. And, therein lies a problem.

Since the (1) housing bust and (2) subsequent recession, many experts have been analyzing the events and lending activities that lead up to these two economic disasters. While much of the blame rests with the sub-prime mortgages, themselves, that were forced upon the banks due the 1977 Jimmy Carter-signed law, the Community Re-investment Act, others have looked at the actions of Freddie Mac and of Fannie Mae in their pushing of low interest rate loans to unqualified borrows in order to fulfill the political desire for "everyone" to get a home of their own.

However, the little mentioned culprits in the housing bust were the debt rating agencies like Moody's Investment Service, Fitch, and Standard & Poors. In fact, these supposed watchdogs of debt in the world, happily stood by with their high grade investment ratings on a lot of risky and bundled sub-prime mortgage instruments like those Credit Default Swaps (CDS) being sold by AIG. In essence, these agencies blindly assumed that any debt instrument that was being sold by a triple-A rated company like AIG should have that company's same high debt/risk rating. But, as we know now, AIG was just using this very fact to actively promote the selling of their very dangerous CDS's to investors who were literally being buffaloed by the rating agencies into believing these investments would be safe to hold.

The slowness of Moody's to downgrade the Greek debt situation just shows that these agency's can't be trusted with watching the sheep. The whole world has known for months that Greece is teetering on a default of their debt. Yet, it was only yesterday that they decided to announce what everybody already knew. What good was that? If anyone totally relied on Moody's to steer them straight on what investments to hold, they would have sat stupidly holding Greek bonds and other debt instruments for months while the value of those investments collapsed; waiting for Moody's to finally recognize the risk involved.

Personally, I think it's time that Moody's and the others be downgraded to junk status!