Who is to be blamed for the Financial Crises? Words from an unlikely victim

Everyday for the past couple of months we have been hearing some new or the other related to recession and the financial crises. This has affected a lot of people in a lot of ways. I am one of those victims. This led me to explore & understand the full extent of the crises and who were best placed to stop this carnage?

History:

Let me however start the whole story from the beginning of the crises. In July 2007, two hedge funds set up by Bear Stearns imploded. Hedge Funds imploding were not new and the structure of those funds was set up that way so that the good ones make huge money and the bad ones are corrected by the market. These ones however had a twist. These funds were projected to be ultra safe investments based on mortgages which were as credit worthy as the Federal Govt. of USA. Anything which is credit worthy as the Federal Govt. of USA is rated “AAA”. When this happened, everybody in the financial world was alarmed as this was equivalent of Apocalypse for the financial world. Folks outside of the financials never felt anything during that time and everything seemed normal. However, that normalcy turned out something equivalent to the day in New Orleans just before Hurricane Katrina hit.

Financial folks frantically started to evaluate their own risks after this incident without letting much information out into the open as to who this could affect common folks. Remember, common folks are affected by these crises as much as the financial world through their 401(k) plans. However, common folks were never explained things in ways they could understand until the crises really hit them really hard.

Blame Game:

Once things started going out of control, the blame game started in the financial world. The Hedge funds managers blamed it on the Banks. The Banks started blaming it on the Mortgage brokers. The Mortgage brokers started blaming the homeowners. The homeowners in turn started blaming everybody other than themselves. New York Times has posted this article “The Trillion Dollar Bet” in July 2005 warning just against this sort of meltdown. However, until George Soros repeated the same statement in Apr 2008 did folks realize the true extent of the crises?

My Analysis:

Common folks like me who never owned a home, diligently paid all their dues to the government still got affected by the crises. This crisis is like no other since this one is affecting the financial industry which is the “CENTRAL NERVOUS SYSTEM” of all the business. Businesses are now running out of credit and not being able to export goods. That is causing disruptions in other parts of the business cycle.

I personally hold the “RATING AGENCIES” responsible for the crises. The big three rating agencies Standards&Poor (S&P), Moody’s, Fitch are responsible for figuring out the risk of each of those loans and then provide a rating. They are supposed to be like “Cerberus: The mythical three headed watch dog from Greek mythology”.

The business of providing mortgages to less than credit worthy folks had always existed. However, that business turned into crises only recently as the folks who are responsible for analyzing the risk failed to do their jobs. These rating agencies didn’t seem to realize the importance of their functions to the entire world. These folks if they had done their due diligence in a proper manner wouldn’t have allowed the financial guys to get the risky assets the same rating as “AAA”.

Now, the rating agencies have the temerity to come back and say with a straight face that they just provide recommendations and their recommendations are not to be taken at face value. That is their job and if there are not in the business of evaluating risks then why do they exist?

Impact on Me:

The actions of the rating agencies have had a direct effect on me even though I had no relation to their business. The dollar has become devalued so much that every item I need to buy had become costly even though my paycheque has remained the same. My daily commute had consumed so much of my spare income that I had cutback on my vacation. I lost my work life balance as now I can only afford to drive to work as all my discretion income is lost to the increased prices on essential items also commonly knows as “INFLATION”.

My life has become monotonous that I am not able to perform my work properly. Thanks to the rating agencies that enabled this crises that common folks like me who were promptly paying all their dues to everybody are also stuck in the crises inspite of not being a homeowner.

SHAME ON YOU GUYS

Maybe it’s time for those rating agencies to remember the phrase from Spider Man Movie: “With Great Power comes Great Responsibility”