“Each of the six banking systems Portugal, Spain, Italy, Ireland, Greece, the UK… faces different challenges, but the contagion risk could dilute these differences and impose very real, common threats on all of them,” Moody’s said.
Moody’s and S&P have begun to do a great deal of damage to the prospects that the sovereign debt crisis will be contained in Greece. This may be in a reaction to how badly they were burned by MBS ratings which were part of the cause of the credit crisis.
Moody’s and S&P are under pressure from investigations by the federal government and several state attorneys general. Almost all of these inquiries could end in fines and more regulation.
One reasonable reaction by the agencies would be excessive caution which, as the pendulum swings, may lead investors astray again. But, in this case it is only another way to cause investors to go astray.
Douglas A. McIntyre
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