The Subprime Mortgage Crisis Devastated From The Global Financial Market

Better Essays
Writing Assignment #2
Financial Market
Yuxue Zhang

The 2008 subprime mortgage crisis devastated from the global financial market. People believed that the “Big Three” credit rating agencies played a significant role at various stages in the crisis. The Reuters, in an article published in 2011, even claimed that credit rating agencies triggered the financial crisis. The Reuters believed that Moody’s Corp and Standard and Poor triggered the worst financial crisis in decades by downgrading the rating on complex mortgages securities triggered the worst financial crisis in decades. However, the problems of rating agencies have existed for quite a long time and accelerated the crash down in some extend. In my opinion, despite the significance of the “trigger”, the credit rating agencies served as the “catalyst” for the crisis by inducing the investor to enter under-served markets. First, there is too much trust and investors are over confident about the rating from the “Big Three”. Rating agencies are remarkably profitable businesses, and they exhibit exceptional influential in the global financial market. As the global capital market grows rapidly, investors seek trustworthy and standardized tool to help their investment decisions. Therefore, when Moody first introduced the rating system in his “Moody’s Analyses Railroad Investment”, the system gained recognition quickly and became popular to investors. When problems of credit risk quickly escalated as financial market grew,
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