Is it wrong that the power of just one organization can ruin multi-national corporations, entire states and counties? The answer is yes, yes and yes.
Moody's Corporation (NYSE: MCO) is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized ratings scale. It is one of the big three credit rating agencies and has a 40% share of the world market, as does its main rival, Standard & Poor's. Fitch Ratings has a smaller share.
Moody's has been accused of "blackmail". In one example the German insurer Hannover Re was offered a "free rating" by Moody's. The insurer refused. Moody's continued with the "free ratings", but over time lowered its rating of the company. Still refusing Moody's services, Moody's lowered Hannover's debt to junk, and the company in a few hours lost $175 million in market value. As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression. A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings.
Moody downgrades Portugal's rating to "Junk Bond" status.
Moody's Investor Service said Tuesday it downgraded Portugal's long-term government bond ratings to Ba2, or junk grade, from Baa1. The outlook is negative. Moody's said it downgraded Portugal on the growing risk the country will need a second round of financing, and that it will not be able to meet deficit reduction and debt stabilization targets as set out in European Union and International Monetary Fund agreements.
Moody's cuts Ireland rating to just above "Junk Bond" status.
The cut in the credit rating also means that the Irish Government will have to pay more in interest for its debt raisings. This is a very bitter pill that it must swallow. Ireland cannot afford the increase in borrowing costs. Not only does it raise the cost of borrowing but with a rating just above junk level, it will actually mean that it will be harder to attract investors willing to purchase Irish government bonds.
Moody's cuts Greece's credit rating deep into "Junk Territory".
Minds will be concentrated after ratings agency Moody's downgraded Greece by three notches deep into junk territory, citing a growing risk that Athens would have to restructure its debt and impose losses on private investors. Greece intends to present a fresh austerity plan on Friday, a government official said, after Moody's cut its credit rating deep into junk territory and said there was an even chance of eventual default.
Moody's says Iceland's debt may be cut to "Junk Status".
Kenneth Orchard, a vice president and senior credit analyst at Moody's Investors Service, talks about Iceland's credit rating after voters rejected a proposed bill on repaying U.K. and Dutch loans made during the island's banking crisis.
Moody's has cut California bond rating to near "Junk Bond" rating.
Not only is this a slap in the face to California, but it also means that California will have to be paying higher interest rates on its bonds. When you're broke, paying higher interest rates is not a good option.
Moody's cuts Japan's TEPCO to "Junk Status".
Ratings agency Moody's on Monday downgraded TEPCO, the operator of Japan's stricken Fukushima nuclear plant, to below investment grade, warning the rating was on review for further possible action. The Japanese unit of the major US credit rating firm said it downgraded Tokyo Electric Power's senior secured debt rating to Ba2 from Baa2. It also downgraded TEPCO's long-term issuer rating to B1 from Baa3.
Moody's Warns of Downgrade for U.S. Credit.
Moody's Investors Service warned Thursday that it might downgrade the United States government's sterling credit rating if Congress did not increase the nation's debt limit "in coming weeks," putting a spur to the sputtering talks between party leaders and the White House on a plan to restore fiscal stability. Independent analyses have shown that more than half of the $14.3 trillion debt is from policies enacted during the past decade when Republicans controlled both the White House and Congress, and much of the rest from lost revenues and stimulus spending and tax cuts since Mr. Obama took office at the height of the financial crisis and recession.
Moody's, one of the premier credit-rating agencies, said that political gamesmanship over raising the government's $14.3 trillion debt ceiling has been worse than expected. If progress toward increasing the limit isn't made by mid-July, Moody's said it would take another step toward reducing the country's top-of-the-line AAA rating by putting the United States under review for a possible downgrade.
How much power is needed to collapse world economics? These are the top five institutional owners of Moody's. Berkshire Hathaway, Capital World Investors, T. Rowe Price Associates, Inc., Capital Research Global Investors and ValueAct Capital Management, L.P.