PLATFORM:UNTIL THIS week I hadn't spoken much to many of my friends who are still working in financial services. This isn't because I blame them individually for the halving of my personal wealth (though that takes a great deal of self-control) but because they've been under the cosh during October.

Clearly sympathy is pretty limited for anyone who has anything to do with finance - saying you work in a bank these days is a licence to be loathed - but it has been a tough time for people who ply their trade in the financial markets.

Not everyone in banking earns ridiculous salaries and not everyone was lending with reckless abandon to every stranger who walked through the door.

But it's certainly true that the metaphorical goalposts shifted over the last 10 years, culminating in the exhortation to one branch employee of my acquaintance to stop thinking of customers as borrowers but treat them instead as potential sales opportunities.

The branch employee is as worried about her job as anyone else in the current downturn. Without money to lend to customers (who are now mere borrowers again) the day-to-day activity has become a slow, painful process.

Thanks to the Government guarantee, though, the depositors have at least returned; including the woman who, at the height of the turmoil, took out all her savings and shuffled home with a few thousand euro tucked into her knickers.

Those who are trading in the wholesale markets are tired. Tired of chasing funding (even though the interbank Libor rates are beginning to ease) and tired of the whipsaw volatility of the markets, which are being battered by a massive and belated aversion to risk.

One of the driving forces that continued to push markets to their highs was the ability of various investment vehicles to leverage risk in order to take advantage of the growth potential that was then predicted.

As the markets fell, those leveraged positions exposed their holders to far more risk that they were able to accept, forcing them to liquidate positions and crystallise their losses. Leverage doesn't allow you the luxury of waiting for a potential recovery.

It is this continued capitulation that feeds the downward spiral, triggering the pain threshold for more and more investors and causing them to decide that enough is enough.

Outside the markets, people are still looking for someone to blame. Greedy investment bankers. Greedy hedge-fund managers. Greedy speculators. Greedy shareholders. Or toothless regulators? Actually, a large portion of blame remains to be placed with the ratings agencies, although the ire has remained strangely muted.

Organisations such as Standard Poor's, Fitch and Moody's were the bodies who bestowed respectability on securitised subprime lending, wrapping the instruments up in investment-grade ratings even while internally voicing doubts.

(In papers released by a US congressional committee last month, an SP employee commented to a colleague that a deal could be "structured by cows and we would rate it".) They also suggested that ratings were only a guide, which is true, and that investors should make investment decisions themselves.

Nevertheless, without an investment-grade rating, many of the debt instruments which were sold around the world might not have found their way into supposedly conservative portfolios. Unlikely as the current crisis may lead you to believe, fund managers have very strict guidelines about the quality of the debt they buy.

Much of the subprime debt was packaged and then rated in a way that made it appear suitable for mainstream investment portfolios. If it had been given the significantly less attractive ratings it deserved, the contagion that has spread through the system might have been contained.

Why did the agencies rate bad paper so kindly? Greed and ignorance. The banks paid the agencies generous fees to rate their paper, and the agencies wanted those fees.

This conflicted relationship was commented on at the time of the Enron collapse too but somehow the agencies emerged unscathed and remunerated even as investors took a bath.

However, like the financial regulators, they were behind the curve when it came to derivative products, being asked to rate instruments of increasing complexity without the history of more conventional products.

The instruments put together by the banks asked for investment-grade ratings while offering higher than expected dividends. But the whole point about investing is that higher risk brings potentially higher rewards.

An investment-grade product paying the same level of a junk bond should sound the familiar warning bell that if something looks too good to be true it is.

The investors waited for someone else to sound the bell. But the agencies allowed it to be muffled by the ringing of the till.

www.sheilaoflanagan.net