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Lámfalussy blames ratings agencies for global credit crunch

Alexandre Lámfalussy, the Hungarian-born former head of the European Monetary Institute, the forerunner of the European Central Bank, blamed international credit ratings companies for the global credit crunch that started with the US subprime mortgage crisis at a book launch in Budapest on Friday.

Lámfalussy said ratings companies had encouraged investors to buy mortgage-backed securities at the launch of the Hungarian translation of his book ‘Financial Crises in Emerging Markets’. Though some investment institutions and banks were prudent, others took unbelievably big risks, he said.

National Bank of Hungary governor András Simor, who also spoke at the launch, said it still remains to be seen whether the US Federal Reserve will generate a new crisis with recent drastic rate cuts. He added that crises cannot always be prevented by tight monetary policy and low inflation. (MTI-Econews)