On 1 November 2010 the Fed commenced QE2, purchasing US Treasurys with the stated intention of reducing long term interest rates. Over the next 4 months, 10-Year Treasury yields rose by 120 basis points (1.20%).
Why do we need the Fed, who can’t punch their way out of a paper bag, when a rating agency (S&P) can send yields plunging 65 points in less than two weeks. 🙂
According to The Big Short (Michael Lewis) it was the rating agencies that played a big part in getting us into this mess in the first place. His general view on ratings agency staff is along the lines of “Those who can, do banking; those who can’t, join a ratings agency”
The rating agencies played an important but minor role in the GFC. If they had not been blinded by the $$$ they could have pricked the bubble before it really threatened. But the major roles were played by the Fed, who held interest rates low for too long and who dithered when they found they had forfeited control of US long-term interest rates to the BOC in Beijing. And the banks, also blinded by the $$$, who took the ball and ran with it, without checking whether it had a lighted fuse.