2008 Financial Crisis Essay

In 2008, the world faced the worst financial crisis since the Great Depression of the 1930’s (also known as the Great Recession of 2008-2009). This great Recession was the result of the Subprime Mortgage Meltdown in the United States. Billions of dollars worth of securities backed by their mortgages had plummeted in value, which in result strained the balance sheets of Wall Street investment banks. The causes of the financial crisis were extremely complex and responsibility fell to many different parties but some analysts questioned the accuracy of the ratings and the critical role in widening financial crisis played by the “Big Three” rating agencies --- Moody's Investors Service, Standard & Poor's (S&P), and Fitch Ratings. One of the main reasons the analysts bore blame on Moody’s was because over the previous years, Moody’s

First and foremost we have the home-buyers who were told to lie in order to qualify for the loan and since no one would verify their information, it would actually work in their favor. Next, the mortgage companies made loans to people and then bundled them together to sell to investment banks so that the mortgage lender had cash in order to create more loans. Then, the investment banks would create a special kind of “bond” so the people who bought the bonds would receive a portion of the mortgage holders monthly payments. The policymakers and government regulators wanted to make everyone a homeowner, regardless of credit, income, or down payment in order to “help” the U.S seem like they were the land of homeowners. The credit ratings agencies, despite the contention that they are not financial advisers, are remiss to believe that institutional investors do not look to their determinations as trusted and valued resources. Even though they legally did nothing wrong, they still committed a huge injustice by not providing their customers with accurate