Indeed, these were the same people that were reporting A+ on junk bonds back then, weren't they? Why are they even still around?
https://www.theguardian.com/business/2017/jan/14/moodys-864m...
https://www.theguardian.com/business/2017/jan/14/moodys-864m...
Fun fact: those AAA securities paid out. We have obvious endogeneity issues with the bailouts. But the evidence is strong that even absent the bailouts, those senior tranches would pay out.
The problem was that most AAA securities are both highly solvent and high liquid. But these proved solvent but illiquid. That caused issues when their owners tried to dump them. But Moody’s rated solvency, not liquidity.
It was honestly a shocking finding at the time. But loss ratios (2.3%) were just within historic norms for what someone buying something rated AAA would expect [1], and to my knowledge, the losses presented as restructurings not outright defaults as is commonly imagined in popular retelling of the financial crisis.
[1] https://www.federalreserve.gov/publications/april-2021-dodd-...
Moody's has been in this game a long time, I'm sure they're not perfect, but also being wrong once doesn't mean you're always wrong.
Doesn't anyone here think the US recent economic instability merits a reduction in credit rating? We have a massive amount of debt (we borrowed to pay something like $800 billion in interest on our debt last year) and are essentially betting on our rocketship economy to offset our enormous debt in the future. The latest economic turmoil does cast a bit of doubt on that ability to pay off this huge debt later on no? I mean, isn't that a reasonable conclusion, regardless of whether you hate Moody's or think they are stupid?
Of course, they were kind of right because a federal government bailout was waiting in the wings.
It’s no secret the USA fiscal path is unsustainable, the Fed has said the same.