by Pascal Najadi, Geneva, Switzerland
The current criminal investigations directed by none less than seven nations into the USD 7 Billion Malaysian State Fund 1MDB must warn all international investors to be cautious with their dealings with Malaysia and any of its banks and entities connected to 1MDB. As such, in common sense logic, all and any banks connected to any project linked to 1MDB are de facto and de jure dealing with a legal person under multiple criminal investigations. And all or any investors linked to any of the aforementioned banks and entities are de jure and de facto in business with an alleged ‘Criminal under Investigation’, 1MDB and its connected entity The Ministry of Finance of Malaysia, to simplify it short and neat, Malaysia. And what do the even better informed international rating agencies about this clear and present threat to international investors? The answer is, Nothing!
We had this situation with absent rating agencies before in modern history. They in fact were accomplice to the largest global markets meltdown since the invention of the telephone. Back then up to the total meltdown in 2007/8, the rating agencies, Moody’s, S&P and Fitch were making juicy fees in establishing and publishing ratings of B level credit that were in fact rated AAA or AA. We are talking of the catastrophic failure of the American Housing market that led to the total failure and meltdown of the American Banking System . The crisis is was the product of a ‘perfect storm’.
The Malaysian 1MDB crisis is another such ‘perfect storm’ for the international rating agencies. Again they are not only absent, again, but they all seem to shy away from properly warning investors around the world about a de facto and de jure government that has no respect for democracy, no respect for Justice, no respect for human rights and one that is now, via 1MDB and the Ministry of Finance and its leader, under scrutiny from the FBI and six other law enforcement agencies. Again the rating agencies fail to do their job. Problem with them is that they get paid from the entity that gets rated and not the investors, the ones that actually should benefit from Rating Agencies supposed to warn for risks associated with the rated entities. All international investors that are dealing today with Malaysia and its banks and entities should be warned. See history in repeat with the catastrophic failure of the Rating Agencies. Yes, they are stumm, again, for now.
Pascal Najadi
Geneva, Switzerland