Paranoid?!
The financial crisis of 2007-2009, caused by the huge fraud in the US mortgage market, is not even cold and the financial world is already confronted with the even more impressive Euro-crisis.
Both crisis have the same origin; investors too eager to invest. Investors have, because of lack of investment opportunities, no idea where to deposit their huge sums of money, so they invest shortsighted in anything that is advised by “professional financial advisers” with expected high return and no risk! Too late institutional investors, like pension funds, realize the risks are much and much higher than the professionals, who earned on selling the securities, had indicated.
I wonder whether banks analyze the products they sell and invest in? They are THE professionals and should not later argue the products are too complex. They hire the brightest quants (=mathematical physicists) so they can and should know what they are doing. Neither can they claim they didn't know that Greece, Italy and other countries were over financed. It is their “professional” business to know, but selling products and making money is probably more appealing than doing business in a honorable way.
The rating agencies Fitch, Moody's and S&P rated junk securities as Triple A not because they didn't know it was junk, but they took money to give false ratings. These highly corrupted institutions are not in any way punished for their fraud; it is business as usual for them and everybody still considers them experts! The banks are no different. They pretend not to know and are bailed out when their balloon explodes.
We have two major financial crisis caused by financial institutions, both costs society trillions, and yet politicians have not taken any measurements to confine the threat the financial system is for society!
Instead of some modesty, after they rip society for trillions, the rating agencies sing a song higher than ever before. These deplorable institutions now systematic downgrade countries. With what purpose? To inform society of the risks involved? In the past their crooked advise was solely for boosting profits at the cost of others. Why should they change this profitable strategy? There are plenty of opportunities to do business as usual and with no repercussions at all; they steal, get caught and keep the money!
Unbelievable but true, the rating agencies, despite their proven corrupted past, did not lose any credibility. Their opinions are still highly valuated by the financial markets, at least that is what you think when you see the financial markets reaction when they downgrade banks or countries.
You should think that rating agencies, with their track record, would be ignored totally. This is however no the case because many institutional investors, like pension funds in the Netherlands, are statutory required to invest in securities with a rating not less than Triple A or AA+ or ... Almost all institutional investors are still obliged to follow the dodgy ratings of the rating agencies. It takes years and years for these institutions to admit they were stupid to impose such stringent investment rules. These institutions are huge, predictable and very, very rigid.
So even when there is undeniable proof these rating agencies are corrupt, institutional investors still are obliged to follow their ratings. Their opinions are still “valued” by the markets. When they downgrade financial markets react accordingly. Manipulation is a very profitable activity. Without hardly any news and little investment, with the help of the leverage of the future markets, financial markets can be manipulated.
If you do not believe this is possible look at the share market. The AEX-index gained 20% in the period September 22 until October 27, lost 14% until November 24 and gained 12% to 305.1 until December 6 2011. The losses and gains of some individual shares are much higher. For ING the percentages were +58%, -34%, and +34%. And what was the news during this period? All the news was made by rating agencies putting pressure on markets and governments.
The neurotic state of the financial markets, the leverage of the future markets and the statuary obligation of institutional investors to follow the advise of corrupted agencies gives investment funds and banks plenty of the opportunity to manipulate the markets. Why not? They earned huge sums in the past with fraudulent actions without getting any punishment. So why not do it again and again and …., or have they suddenly become honest because they feel ashamed and cannot enjoy their stolen money, or are they still playing the same crooked game. Maybe I'm just paranoid.
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