Rating Agencies: The Unseen Hand
Let's follow the trail: FIRST INSTANCE: The Precedent of 'Risk' Escalation The ability of credit rating agencies and index providers to dictate market sentiment based on subjective 'risk' assessments is not new. In 1997, during the Asian Financial Crisis, Moody's and S&P Global Ratings were heavily criticized for downgrading several Asian economies, including Thailand, South Korea, and Indonesia,
often after the market downturn had already begun. This amplified the crisis, triggering capital flight and exacerbating economic distress. Malaysia's Prime Minister Mahathir Mohamad, for instance, openly accused these agencies of being Western tools for economic destabilization (Asian Development Bank, 1998). REPETITIONS: The Playbook Evolves 2008 Global Financial Crisis: While not a developing
nation, the power of rating agencies to misinform was starkly exposed. Agencies like S&P and Moody's assigned AAA ratings to subprime mortgage-backed securities, directly contributing to the collapse. The subsequent investigations, like the U.S. Senate Permanent Subcommittee on Investigations report in 2011, detailed how these agencies prioritized revenue from issuers over accurate ratings. 2010
European Sovereign Debt Crisis: Greece, Ireland, Portugal, and Spain faced repeated downgrades by these same agencies, intensifying their borrowing costs and forcing them into austerity measures. In May 2010, S&P downgraded Greece to junk status, triggering a cascading effect across the Eurozone despite the country being an EU member. This was often justified by 'investability concerns' regarding