Downgrading the Downgraders

Although Standard & Poors publicly stated reasons behind their decision to downgrade the credit rating of the United States from “AAA” to “AA+” were correct in as much as the handling of the phony debt-ceiling crisis, it was also illustrative of a serious systemic problem existent in the Republican Party.

As S&P wrote in their release:

“The political brinksmanship [of the GOP] of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.”

“It appears that for now, new revenues have dropped down on the menu of policy options.”

“The act contains no measures to raise taxes or otherwise enhance revenues”.

“Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 [Bush] tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues.”

Succinct and without reservation… all well and good (if you could call it that)… yet one wonders where they were just a short time ago when they were lobbying Congress and the Obama Administration to relax (translate: “ignore”) the provisions of the “DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT”… a piece of legislation that was spurred by, amongst other things, the malfeasance of (you guessed it) STANDARD & POORS and the two other large credit rating agencies.

“Conflict of interest” anyone??

The derivates market collapse was amplified by these VERY ratings agencies which rated complex subprime vehicles like CDOs  and SIVs VERY HIGHLY…

JUST like they gave THAILAND an INVESTMENT GRADE RATING until 5 months AFTER the Asian financial crisis…

JUST like they gave ENRON investment grades until DAYS before its BANKRUPTCY…

Just like …  hell, S&P actually thought that the “Alan Keyes/Mike Gravel ’08” ticket would win the White House (would YOU take advice from such a gaggle of delusionals?).

How common were their poor ratings?

Over 90% of the AAA ratings given to subprime securities in 2006 and 2007 were later DOWNGRADED TO JUNK STATUS.  These rapid, last-minute downgrades shattered investor confidence and triggered the market collapse.

Moody’s, Fitch and S&P KNEW these products didn’t deserve high ratings and that providing them was something between NEGLIGENCE and FRAUD, but, apparently money calms the conscience.

Moody’s and S&P were PAID TO RATE PRODUCTS by the VERY FIRMS who would PROFIT from their ratings.

No high ratings, no business.

This “conflict of interest” became a “confluence of opportunity” as most conversations between the issuers and the raters went like this:

“I want to sell this pile of SHIT.  I’ll give you a million dollars to decide what it’s worth.”

“Hey everybody!  Hurry up and buy this lumpy brown gold!”

It’s just like when ARTHUR ANDERSON was paid by ENRON to audit and approve Enron’s accounting scams.

Two differences: Arthur Andersen was DISSOLVED for being an ACCOMPLICE TO FRAUD and when Enron eventually collapsed, it only ruined Houston.

Even still.. even after the downgrade, their lobbyists are scurrying around Washington like tidal wave of cockroaches trying to castrate the safeguards that would have prevented the collapse.

For those who need a “refresher”, here’s a brief recap of the major provisions of “Dodd-Frank” which was enacted last year when the Democrats still controlled the House of Representatives:

1. Ends Too Big to Fail Bailouts:

Ends the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed’s authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.

2. Advance Warning System:

Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.

3. Transparency & Accountability for Exotic Instruments:

Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated — including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.

4. Executive Compensation and Corporate Governance:

Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and golden parachutes.

5. Protects Investors:

Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses.

6. Enforces Regulations on the Books:

Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefits special interests at the expense of American families and businesses.

7. CREATE A STRONG CONSUMER FINANCIAL PROTECTION WATCHDOG;

(a) The Consumer Financial Protection Bureau:

Independent Head: Led by an independent director appointed by the President and confirmed by the Senate.  (This WAS to be Liz Warren.. but the the GOP House quashed her appointment).

(b) Independent Budget:

Dedicated budget paid by the Federal Reserve system.

(c) Independent Rule Writing:

Able to autonomously write rules for consumer protections governing all financial institutions – banks and non-banks – offering consumer financial services or products.

(d) Examination and Enforcement:

Authority to examine and enforce regulations for banks and credit unions with assets of over $10 billion and all mortgage-related businesses (lenders, servicers, mortgage brokers, and foreclosure scam operators), payday      lenders, and student lenders as well as other non- bank financial companies that are large, such as debt collectors and consumer reporting agencies. Banks and Credit Unions with assets of $10 billion or less will be examined for consumer complaints by the appropriate regulator.

(e) Consumer Protections:

Consolidates and strengthens consumer protection responsibilities currently handled by the Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Administration, the Department of Housing and Urban Development, and Federal Trade Commission.

Heavens to BETSY!!!

We can’t have any of THAT, can we… why it’s.. it’s  {{{{gasp}}}} SOCIALISM!!!!

As Bernie Sanders quipped, “”I find it interesting to see S&P so vigilant now in downgrading the U.S. credit rating. Where were they four years ago when they, and other credit rating agencies, helped cause this horrendous recession by providing AAA ratings to worthless sub-prime mortgage securities on behalf of Wall Street investment firms”?

Well… they were busy colluding with the Bush Administration to extend the tax-cuts for the rich, the “Investment Banks”, hedge fund managers, sub-prime lenders, derivatives pushers and other credit ratings outfits like Moodys and Fitch to bilk the WORLD ECONOMY out of  TRILLIONS.

They succeeded.