Rating Agency Goes Bonkers

Morgan Stanley Extends Drop as Moody's Says Rating May Be Cut

S&P May Cut GM to Junk

At this kind of situation. rating agencies are being foolish to compound the failure of the financial system.

When companies are improving their earnings, asset price increases, rating agencies will rate them AAA. But they don't have an idea that in good times, asset prices are inflated to good times. How are prices determined? By market forces of course. Who are the market forces? You, me and everyone in the world. At that time of rating, everyone is optimistic and so on, thus everything looks good.

By cutting the rating of major blue chip companies, they are forcing the companies to harakiri. If they cut the rating, the cost of capital for those companies will increase because it will be seen as more risky, requiring a higher interest on debts.

I thought that rating agencies are supposed to regulate not disintegrate. They are pushing ratings of companies either Up to a peak or down to a pithole without a equilibrium.

Well, God Bless America....