One of the most frustrating things about Obama’s playing the role of The Great Conciliator is his belief that we should ‘look forward, not back’, that there should be no accountability for those who have failed or committed fraud. Leaving aside notions of justice (which these days is best for one’s sanity), this idiotic belief allows the incompetent and the malfeasant to continue their harmful activities. Case in point: the financial rating agencies. These are the bozos who went along with Wall Street’s alchemy wherein shitty loans were magically turned into AAA securities (the highest rating).
The head of Standard and Poor’s warned that S&P might downgrade U.S. Treasuries if the debt limit ceiling isn’t increased. Fair enough: they’re in the business of figuring out if investments will pay out.
Chambers added in the interview that even if the parties agree to raise the debt ceiling, it may not be enough to avert a downgrade. Chambers said the country must implement a plan to reduce the annual budget deficit by roughly $4 trillion over 10 years, which makes the debt manageable over the long term.
The White House and Congress have discussed a plan that big, but negotiations have more recently centered on a smaller deal, at $2 trillion or less.
“That could still lead to a downgrade,” Chambers said.
First of all, who elected these assholes? I don’t remember seeing their names on any ballot. That aside, it’s utter idiocy. We are mired in unemployment, industrial capacity is idling, and corporations and banks are hoarding cash. If they’re making this statement based on future inflation rates (which isn’t what they claim to do), they’re idiots. If they believe that the U.S. government won’t make good on the bonds (even if there’s a delay), they’re even dumber.
Now, you might say, “Well, there are lots of assholes. Isn’t Chambers just another asshole?” Well, he is an asshole, but S&P is a very important asshole. Why? Because many institutional investors, such as pension funds, are required to hold certain amounts of AAA securities, including U.S. securities. If U.S. securities are downgraded, these investors will have to sell them, further undermining the value of U.S. securities, and increasing borrowing costs.
This is essentially corporate extortion designed to force a policy outcome. Apparently, a two trillion dollar reduction in government spending–which will lead to a commensurate decrease in aggregate private sector holdings–isn’t enough (translation: households–you–are going to be poorer through unemployment and rising personal debt). We are being blackmailed for even more cutsm since S&P is claiming they might downgrade the rating of U.S. Treasuries, even though there is no viable means of default (provided the debt ceiling is raised).
Oddly enough, when the ratings agencies were questioned about the ratings of housing loan bundles, they claimed they just offered ‘opinions’:
If the various federal agencies had come down on these guys like a ton of bricks–fines and jail time–they would be a lot more circumspect. Instead, they know they can get away with anything–including being to the right of the Republican base economically.
This isn’t just horrible meddling in terms of economic outcomes, but a confirmation that the political system is a wholly owned subsidiary of the banking system. The owned include President Obama, and most of the Democrats in Congress.