S&P And Moody's May Have Missed Greek Trouble

S&P and Moody’s may have missed critical signs that Greece was in trouble.

The New York Times reports that Moody’s in particularly did not see how bad things were in the southern EU nation

Until two years ago, the ratings agency took a relatively lax approach to growing signs of troubles in Greece, epicenter of the current crisis, even as the country plowed ahead with a borrowing binge that jeopardized its fiscal condition.

The criticism is based on a sound premise. Unemployment in Greece has been high for years. Its GDP has been troubled. Its debt to GDP ratio has been troubling as well.

It may be that the ratings agencies ignored Greece’s problems in the same way that capital markets investors did. Most sophisticated investors, particularly at European based banks have the capacity to make evaluations of their own. That means that the rating agencies did a poor jobs, but so did others who had the capacity to avoid the pitfalls of the nation’s sovereign paper