Rating agencies, such as S&P and Moody’s, evaluate financial assets and rate them in terms of their riskiness. For reasons that should not be mentioned, these agencies decided that the toxic assets were of the highest quality, and least riskiness – equal to sovereign debt. All this while, the regulators had, more or less, gone to sleep.
Available data suggest that foreign institutions liquidated about $ billion in Treasury securities in March, with more than half from official institutions and the remainder from private foreign investors, at a time when offshore dollar funding markets also experienced acute stress.