The ratings agencies are definitely annoying most Western governments these days. They've suggested downgrading the US debt, Greek debt, Spanish debt, Portuguese debt, you name it. These are of course the same ratings agencies that loved the heaping piles of steaming dog turds that triggered the global recession. When they were called in front of Congress, they had the simple excuse that their ratings were merely suggestions so they could not be held accountable. In the real world that is not the case. Lower debt ratings means higher debt financing.
While it's fair for all of us to be upset with the latest round of downgrades and threats of downgrade, the real anger should be redirected to the failure to call them out during the crisis. It was an exposed industry, ripe for reform. They were given a free pass during the crisis and no effort has been made to reform the industry or hold it accountable for its actions. If the industry is not going to be forced to behave differently, why would it? Just as the bankers are back to doing the shady business that they did before the crisis, the ratings agencies felt no need to reform.
Blame the lack of political leadership for this.
Moody's Investors Service on Friday put the Spanish government's bond ratings on review for a possible downgrade, citing funding pressures and a precedent set by the euro zone's debt package for Greece.As he always does, Robert Reich had an interesting blog post about the ratings agencies earlier this week.
Moody's said any change in the Aa2 rating would likely be limited to one notch.
