All the reports we had seen in the past before the financial crisis, were de facto spurious ! They were all not bona fide!
In actual fact, most of them were misleading. Let's take a look at the notes below.
"Had credit-rating agencies been more careful in issuing ratings or downgraded ratings in a more responsible manner, we maybe would have averted the crisis," said Sen. Carl Levin, D-Mich., chairman of an investigations subcommittee. "But they did not. Without credit ratings, Wall Street would have had a much harder time selling securities because they wouldn't have been considered safe."
The investigation -- which reviewed hundreds of emails and interviews with officials at rating agencies -- revealed a world of overwhelmed analysts who didn't have enough data about securities they were rating and were under pressure from investment banks such as Goldman Sachs Group Inc. to issue good ratings for complex securities that were at the heart of the financial crisis.
Levin's investigation found that 91% of AAA-rated, residential mortgage-backed securities issued in 2007 and 96% of similar securities issued in 2006 have now been downgraded to junk status.
Later, they too announced mass downgrades of hundreds of subprime mortgage-backed securities.
Well, at least now we know, we should not always look at the reports of the experts for they are experts at obfurscating the facts and they have the propensity to lie just to paint a more beautiful picture to stimulate the economy.
If you guys are familiar with the accountancy field, you should know that accountants that give clean reports will always be sought after by top companies because these reports are coveted by almost any companies.
Why is that so? Simply because by having a clean report, whatever they sell will be highly sought after as well. For instance, if the company Procter & Gamble's record is clean, their consumers will naturally trust that the products they sell are trustworthy.
If the report is ugly, then the consumers will naturally veer away from the products just in case they might get themselves hurt from the products they consume.
The same logic applies here, the rating companies will give great ratings so that they will find themselve a myriad amount of business which will naturally accentuate their strong reputation!
All in all, they will do whatever it takes to beguile the public and to lure them into the trap of the highly precarious securities!
Hence, if you wish to buy securities in the future, do not rely merely on reports, trust your own judgement and look at the news from all angles. Don't be too gullible.
Credits -marketwatch
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