Downgrading Europe

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Greece, Portugal, and Spain all got downgraded by the ratings agencies this week. AP reports on the reaction:

The rating agencies that sort good investments from junk are once again injecting fear into financial markets. Only this time it’s for warning investors about a possible threat — Europe’s debt crisis — rather than for failing to see one coming.

….European Union officials weren’t pleased by the negative ratings. ”Who is Standard & Poor’s anyway?” EU spokesman Amadeu Altafaj Tardio said Wednesday. He said the agency should better assess ”realities on the ground,” such as financial rescue talks in Athens ”that are making rapid and solid progress.”

Color me unsympathetic. Tardio sounds like every CEO talking his book ever quoted in the Wall Street Journal. However, this does demonstrate one of the problems you’d have if you got rid of the ratings agencies and just had the SEC do the job instead. Rating the securities issued by U.S. banks is one thing, but can you imagine the United States government downgrading the sovereign debt of friendly countries? I can’t. And if they did, can you imagine the reaction? I can. Oh yes, I surely can.

The ratings process, obviously, has big problems. But although putting ratings under the thumb of the U.S. government might solve one of those problems, it would also create a whole set of new ones. This remains a very difficult problem.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America will move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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