On debt crisis, the rating agencies show up late — again

At the risk of establishing a precedent for fortnightly references to Robert Reich, I was intrigued by another piece the former labor secretary wrote for the Huffington Post. But unlike last time, I actually agree with much of what Reich says about the credit-rating agencies, the financial collapse and the current national-debt crisis.

In particular, Reich blasts Standard & Poor’s, which is warning it may downgrade Washington’s credit rating if Congress and the White House can’t agree to $4 trillion in deficit reduction:

Who is Standard & Poor’s to tell America how much debt it has to shed in order to keep its credit rating?

Standard & Poor’s didn’t exactly distinguish itself prior to Wall Street’s financial meltdown in 2007. Until the eve of the collapse it gave triple-A ratings to some of the Street’s riskiest packages of mortgage-backed securities and collateralized debt obligations.

Standard & Poor’s (along with Moody’s and Fitch) bear much of the responsibility for what happened next. Had they done their job and warned investors how much risk Wall Street was taking on, the housing and debt bubbles wouldn’t have become so large — and their bursts wouldn’t have brought down much of the economy.

Had Standard & Poor’s done its job, you and I and other taxpayers wouldn’t have had to bail out Wall Street; millions of Americans would now be working now instead of collecting unemployment insurance; the government wouldn’t have had to inject the economy with a massive stimulus to save millions of other jobs; and far more tax revenue would now be pouring into the Treasury from individuals and businesses doing better than they are now.

In other words, had Standard & Poor’s done its job, today’s budget deficit would be far smaller.

I would even agree with Reich that the coziness between the rating agencies and the Wall Street firms whose products they were supposed to be evaluating was a key factor in their missing the boat on the not-so-safe securities they kept approving as AAA. I would, however, go a step further and point out that the Securities and Exchange Commission contributed to this coziness by maintaining a three-headed oligopoly of approved rating agencies; some more competition among rating agencies might have led at least one of them to do a better job examining these securities and looking out for those purchasing them, instead of only those who were selling them.

This of course relates to the debt-ceiling debate. The same rating agencies that got too cozy with the financial firms cannot have been too eager to make too much of a fuss about the finances of the government that shielded them from competition. If S&P, et al. are finally speaking out, things must truly be bad. But, given the way the sparring sides in the debt-ceiling talks have wielded the threat of a credit downgrade, it would have been very helpful to the taxpayers if these alarm bells had been sounded, say, a year — or three — or five — ago.

That doesn’t mean S&P and the others are wrong or can be ignored now, just that they’ve undermined their own role by showing up to the party so late…again.

The nexus and interdependence of Big Government and Big Business erode both good government and free markets — and spark many of the problems we face. On that, even a true-blue progressive like Reich and I can agree.

– By Kyle Wingfield

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56 comments Add your comment

JF McNamara

July 27th, 2011
6:55 am

I agree mostly. I ignore the rating agencies completely. They’ve never been right about anything, because they’ll say anything you want as long as you purchase from their consulting arm. They probably got paid by one side to make a fuss. You’re better off just seeing what the market is doing for real information on economic health.

In terms of Oligarchies, what major industry isn’t an oligopoly? Bush killed antitrust, remember? That’s one of the rights pet projects, eliminating competition and then protecting the big business oligopies for donations. I can’t believe you even bought that up.

Ronnie Raygun

July 27th, 2011
6:58 am

Of course theses ratings agencies like Standard and Poor’s could just be parroting the GOP talking points to win their favor and avoid any government oversight or regulation so that they can continue their corrupt investment ratings without question. Wall Street demands business as usual.

Ayn Rant

July 27th, 2011
6:58 am

Kyle, big government is not the cause of cozy relationships with big business. Elected politicians who depend on big business for campaign contributions, and other favors, are the cause.

You should note that after the necessary government bailout of the big financial institutions (TARP enacted by the Bush administration), the financial reform needed to prevent another round of financial exuberance and economic blowout has been blocked by Republican politicians, as a favor to their campaign contributors.

Note also that in the debt ceiling debacle, the same Republican politicians doggedly defend the tax loopholes and outlandish subsidies enjoyed by their big business contributors.

Ben

July 27th, 2011
7:16 am

Ayn, I would disagree heartily with the necessity of the bailouts, which rewarded failures and punished those who succeeded. I didn’t like it then, I don’t like it now. And if government wasn’t so big, then those politicians, who after all are just flawed humans like the rest of us, wouldn’t have so much power to throw around, and thus could do less harm to the average citizen.

DeborahinAthens

July 27th, 2011
7:20 am

Republicans, for eight years that they controlled the Presidency and Congress, built a mountain of debt for which we are responsible. Where was the righteous indignation when their chosen one, Dubya the Dumb was lying and playing games with the budget? Right now, if we can get rid of Medicare Part D, stop paying extortion money to Afghanistan and Pakistan, get our troops out of Iraq and Iran, stop the insanity of the Bush education “initiatives” , and put the tax rates back to where they were during the Clinton boom years. This BS about lower taxes creating jobs has been demonstrated to not work. So what is this nonsense from the Republicans that taxes are sacrosanct? From 2003 when the Bush tax cuts were implemented, we shed hundreds of thousands of jobs. If you don’t believe this go to the DOL website and look at the graphs. You Republicans are irresponsible and unreasonable, and I hope the voters remember you in 2011.

Parah Salin

July 27th, 2011
7:40 am

The credit rating services use a formula that is not always an appropriate tool to evaluate different investments. Think about this, if I lose my job and can’t afford to put gas in my car, pay my child’s tuition, and start dipping into my retirement savings to pay bills, my credit score will only fall if I fail to meet my debt obligations. Governments should be evaluated the same way. Whether the government fails to raise the debt ceiling should not be as important and whether the feds miss a payment on the federal debt. The debt obligations will continue to be met after August 2, regardless of what happens. The US threatened to stop paying its dues in the UN a few years ago because of concerns over abortion in foreign lands. Using the same logic the credit agencies are using now, we should have seen a downgrading of our AAA credit rating. After all, we were not paying all of our bills then either. I agree with Kyle and Robert Reich, the AAA rating will be restored as soon as there is serious debate about expanding the number of agencies that can issue credit rating. I disagree with most of the right that a cuts only approach is the best way to lower the debt. I think if we ran up the bill, we should pay for it, not our children and grandchildren.

jconservative

July 27th, 2011
8:14 am

Re the National Debt. For those who believe this is a recent crisis, please see below.

This is the national debt at the end of the Fiscal Year of the last budget signed by the president named. Since 1977 each presidents gets credit for the budgets he signs.

9/30/2009… $11,909,829,003,511.70… Last Bush budget
9/30/2001… ..$5,807,463,412,200.06… Last Clinton Budget
9/30/1993… ..$4,411,488,883,139.38… Last Bush Budget
9/29/1989… ..$2,857,430,960,187.32… Last Reagan Budget
9/30/1981 ……..$997,855,000,000.00… Last Carter Budget
9/30/1977 ……..$698,840,000,000.00… Last Nixon/Ford Budget

We have been going down this deficit road for over 30 years.

I thought maybe with the Tea Party types hitting Congress we might see some serious reduction in the deficits and in spending. But alas, the Tea Party walked away from a $4 trillion reduction in deficits, $3 trillion in spending and $1 trillion in closing tax loopholes. Now it looks like we will do just over $2 trillion in deficit reductions.

Apparently Congress still does not appreciate the necessity to reduce deficits. A lot of talk and little action.

Just The Facts

July 27th, 2011
8:30 am

Since it’s Congress that passes the Budgets, sets the Deficits, and provides legislation affecting jobs and the economy, let’s look at the record of Congresses over the last 30 years (thank you Boehner for schooling Obama on what the Constitution says about that):

JOBS

Jobs created when Democrats controlled Congress (12 years) = 8,100,000 net new jobs.
Jobs created when Republicans controlled Congress (10 years) = 21,773,000 net new jobs.
Jobs created when Congress was split (8 years) = 9,888,000 net new jobs.

DEFICITS

Total Deficits when Democrats controlled Congress (12 years) = $5.022 Trillion.
Total Deficits when Republicans controlled Congress (10 years) = $1.219 Trillion.
Total Deficits when Congress was split (8 years) = $1.063 Trillion.

NATIONAL DEBT

Total New Debt when Democrats controlled Congress (12 years) = $7.859 Trillion.
Total New Debt when Republicans controlled Congress (10 years) = $3.238 Trillion.
Total New Debt when Congress was split (8 years) = $1.781 Trillion.

Sources – Democrats controlled Congress from 1987 – 1994, and from 2007 – 2010. Republicans controlled Congress from 1995 – 2000, and from 2003 – 2006. There was a split Congress from 1980 – 1986 and for 2001 & 2002.

Jobs – http://www.bls.gov
Deficits – whitehouse.gov
National Debt – treasurydirect.gov

And then there’s that left wingnut media billionaire George Soros, aka Mr. Hedgefund, who has dumped his Quantum fund and returned the money to the investors because he didn’t want scrutiny under the increased SEC regulations coming. Now that’s what I call Moveon. Liberal socialists are so pathetically hypocritical.

jm

July 27th, 2011
8:40 am

While the rating agencies were asleep on CDO’s etc, his conclusions are all wrong Kyle.

In addition, as you point out, S&P and others are correct on the sovereign debt ratings. Goverments also happen to be easier to analyze than a CDO.

Check these stats

July 27th, 2011
8:45 am

How many rating agencies is enough? 5? 10? Look, I know you patriots hate the government, as crazy as that sounds. If these three had done their jobs, we wouldn’t need any other rating agencies. To somehow blame the government for the lack of oversight given by three PRIVATE companies is a far reach. Does government screw a lot of things up? Yes, but it is also a needed component in society to oversee the cuddly job creators who want nothing more than to create jobs. You act as if private companies are all saints and everything is the fault of the evil government. Get real.

real john

July 27th, 2011
8:51 am

jconservative and just the facts thanks for providing the numbers.

I’m betting you probably won’t get ONE response from the Libs. They have a difficult time when presented with actual facts. They just like to spew MSNBC talking points..

Just to add another…

Defecit spending under Clinton…$536 million a day

W Bush…$1.6 Billion a day

Obama….$4.1 Billion A DAY..

Yet, the libs STILL want us to keeping spending more money. They argue the stimulus wasn’t large enough. How absolutely stupid can some of these people be??

Lil' Barry Bailout

July 27th, 2011
8:52 am

I like how jconsevative includes the Idiot Messiah’s 2009 spendfest, including the failed $800 billion non-stimulus and the auto bailouts, on our President Bush’s tab.

The Idiot Messiah is the only pResident ever to run or propose trillion dollar deficits, and he does it EVERY year, even tho the recession ended over two years ago.

jconservative

July 27th, 2011
8:53 am

Just The Facts

Good job.

You left out that in the last 30 years Republicans were in the White House 20 of the 30 years, and except for one veto by Clinton, every budget passed by Congress was signed by a president.
As I have been preaching for years, there are no innocents here.

And in the 2000’s the “net jobs created” for the decade was zero percent per the BLS. Here are the numbers by decade for “net jobs created’, jobs created less jobs lost.

1960’s….31%
1970’s….27%
1980’s….20%
1990’s….20%
2000’s…..0%

And there is this for what it’s worth: “. U.S.-based multinational companies have been focused overseas for years: In the 2000s, they added 2.4 million jobs in foreign countries and cut 2.9 million jobs in the United States, according to the Commerce Department.”

I still maintain that the “jobs problem” in the US will not be resolved by legislative action. The country has undergone a fundamental change in its economy. Manufacturing is gone compared to the 1960’s and will never return.

The post WW II “middle class” that drove the US economy for decades is slowly disappearing

We are plowing new ground.

ByteMe

July 27th, 2011
8:58 am

some more competition among rating agencies might have led at least one of them to do a better job examining these securities and looking out for those purchasing them, instead of only those who were selling them.

This is misinformed. The rating agencies were selected by the people creating the SIVs and reaped huge profits because they were happy to rate an investment vehicle they didn’t completely understand (or care to understand, whichever). In other words, the deal was shopped and the rating agencies were willing to give the best rating because they got paid to do that. The number of agencies wouldn’t have changed that and might have made it easier to do that.

As for the rest, yes, S&P is out of its depth by insisting on what the debt deal needs to be for the USA to keep its AAA rating. If we stop paying on interest, sure, I can see that… but until we do, we have the ability and capacity to keep paying the interest, so what S&P is doing is political and not analytical.

ByteMe

July 27th, 2011
8:59 am

Manufacturing is gone compared to the 1960’s and will never return.

The post WW II “middle class” that drove the US economy for decades is slowly disappearing

We need to declare war on China and level their manufacturing abilities so that our empty factories will be there to pick up the slack. It worked for us in WW2.

jconservative

July 27th, 2011
9:04 am

Lil’ Barry Bailout
“I like how jconsevative includes the Idiot Messiah’s 2009 spendfest, including the failed $800 billion non-stimulus and the auto bailouts, on our President Bush’s tab.”

Actually I did not do anything but copy and paste the numbers. If you want to blame someone blame Congress (Democrats had both chambers) for passing the 1977 bill and Ford (Republican) for signing the bill.

Democrats holler because the Bush 43 spending in 2001 gets credited to Clinton because he signed the 2001 budget. Republicans holler because Bush gets credited with the Obama spending in 2009.

This is the way your government keeps the books.

But on the bright side, just about everyone gets to holler about something and everyone is happy.

Jm

July 27th, 2011
9:06 am

Byteme, well both of u may be misinformed. S&P has every decent ability to analyze the US government. In addition, competition between rating agencies is what created the mess on wall street, so more competition does not solve the problem.

Actually, the only solution is really to place funding on the buy side, but that means these guys will soon go out of biz. Burghers are solutions. And only dumb people listen to their ratings. US was queued up for a downgrade a long time ago…. But the recent shocking deficits are the final straw.

ByteMe

July 27th, 2011
9:15 am

S&P has every decent ability to analyze the US government.

They do, but if you read the public statements from their “analyst”, they have been changing the goalposts from week to week. And they’re demanding what kind of deal needs to be done to keep their rating… even though the size deal he proposes still doesn’t address the systemic issues in our budgeting process. That makes his comments political.

If S&P said: USA needs to raise revenue/taxes by 30% to keep their AAA rating, would you think that a political or an analytical statement? I’d say political, even if I agreed with the statement.

JDW

July 27th, 2011
9:19 am

Kyle, you can mark me down in mostly agree column. On the subject of the SEC I believe that under direction from Duhbya’s Administration they just simply stopped almost all oversight and enforcement. Remember Bernie Madoff?

ByteMe

July 27th, 2011
9:25 am

On the subject of the SEC I believe that under direction from Duhbya’s Administration they just simply stopped almost all oversight and enforcement.

You believe correctly. Christopher Cox, the head of the SEC during the bad years, was on record saying that the big banks could self-regulate. And Henry Paulson, before he was brought in to run Treasury, was the main lobbyist for allowing the big investment banks to leverage higher than their legal limit of 12:1 (in Bear-Stearns, it was running about 60:1 before they went bankrupt). So, yeah, the government let this happen to us and then devised the solution that pumped billions into these same banks. Uh….

Jefferson

July 27th, 2011
9:27 am

It what the overseas investers think that matter. If they are swayed more interest cost. Tough love.

Lil' Barry Bailout

July 27th, 2011
9:42 am

Had the free market been allowed to function and the government not become entangled in the housing market, none of this would have occurred.

Thanks, big-government libtards!

Lil' Barry Bailout

July 27th, 2011
9:45 am

Remember Bernie Madoff? Yeah, I do. You do know that his Ponzi scheme started in the early nineties, right? IIRC, our President Bush wasn’t President then.

Richard

July 27th, 2011
9:49 am

Attention Incumbents in Washington,

Don’t bother running for reelection. No one is voting for any of you.

Sincerely,
America

Jm

July 27th, 2011
9:52 am

Byteme, s&p saying th size of the deal required is not political. They have only said how much the deficit needs to be reduced. They have not said anything about whether it should be done with higher taxes or more spending cuts. Ergo, I’d say thus far they have been apolitical. Though I think if they said the deficit reductions need to come from spending cuts, not revenue increases, that wouldn’t be olitical either. Thats the realistic advice places like Greece and the US need, because scale of government affects ability to pay.

Bart Abel

July 27th, 2011
9:55 am

RE: “The nexus and interdependence of Big Government and Big Business erode both good government and free markets — and spark many of the problems we face. On that, even a true-blue progressive like Reich and I can agree.”

Kyle Wingfield and Robert Reich agree that the rating agencies made mistakes, but they don’t agree that “Big Government and Big Business erode both good government and free markets”.

Further down in his piece, Reich wrote, “So why has Standard & Poor’s decided now’s the time to crack down on the federal budget — when it gave free passes to Wall Street’s risky securities and George W. Bush’s giant tax cuts for the wealthy, thereby contributing to the very crisis its now demanding be addressed? Could it have anything to do with the fact that the Street pays Standard & Poor’s bills?”

What can we do about the fact that Wall Street pays S&P’s bills? Big Government. Specifically legislation, and enforcement of such legislation, is needed to eliminate the twisted incentives that make the rating agencies so unreliable.

Kyle Wingfield

July 27th, 2011
9:57 am

Bart: And who pays the campaign bills for Big Government?

Logical Dude

July 27th, 2011
9:57 am

“Dubya the Dumb ” ” Idiot Messiah” “Duhbya” “Obozo”

Well I think I see the problem with this country. If you can’t even respect the other side to call them by their actual name, especially THE PRESIDENT(!), then ALL OF US are in trouble.

Once all of us realize that the problem IS ALL OF US, then the solution will no longer be to “blame the other”, but to move forward with real solutions of cutting spending and increasing revenues.

Gordon

July 27th, 2011
10:05 am

jconservative and just the facts,

I think everyone can agree that both parties are responsible for this mess. Both have controlled the White House, Congress, or both during times of massive spending. The debt and deficit are there, and now it is time to do something about it. Though neither is doing near enough, it seems clear that one part wants to reign in spending more than the other. It also seems clear that Obama is NOT serious about cutting spending, based on these facts:

1) He has not provided any proposal for deficit reduction, only talked in generalities about one.
2) He formed a bi-partisan debt commission and then went out and spent a lot of money before they reported back.
3) When they did report back, he ignored their proposals.
4) He barely mentioned spending restraint in his State of the Union address.
5) He submitted a budget that increased spending which was unanimously rejected by the Senate.

Bart Abel

July 27th, 2011
10:06 am

We also note that the rating agencies have an ideological bent, as a result of their financial incentives, that create double standards. They have been shown to apply higher standards to public debt than they do to private debt despite the fact the public debt is historically safer.

“…the ratings agencies own internal analysis shows that they are terrible at rating government debt. Their ratings are all off, as government, especially those with a printing press for their own currency, simply don’t behave like the corporate world they were designed to analyze. And rather than just being wrong, they are wrong in that they are always overestimating the liklihood that governments will default.”

http://rortybomb.wordpress.com/2011/07/24/the-activist-ratings-agencies-and-their-poor-public-sector-predictions/

DBCOOPER

July 27th, 2011
10:06 am

Did I read that their is a congress person from California who actually said that America’s debt is something made up by the Republicans to stir up controversy?

And we wonder why this country is in the trouble it is. Look at the people voted into office. James “Gerrymander” Clyburn of SC actually said “the only way we can recover from this crisis is to spend our way out”. That’s who is in Washington!!!

God Help us!

Lil' Barry Bailout

July 27th, 2011
10:09 am

Wall Street SHOULD be paying the ratings agencies bills–they’re purchasing their services, duh!

Government involvement is the root cause. Government is the problem. Fix the government and leave businesses alone to prosper or fail on their own.

retiredds

July 27th, 2011
10:12 am

Gordon: see the following link,

http://www.cbsnews.com/stories/2011/07/26/eveningnews/main20083834.shtml?tag=stack

Then tell me that the new and conservative Republicans are serious about cutting spending. They say they are but when it comes to their districts it is another story. The noise you hear out of hypocrites like Graves, Gingry, Braun, et. al. is just that, noise. They want to cut spending, as long it is not in their districts. As Joe Miller would say, they lie.

Oh, and let’s not forget, in order to get elected in GA they have to be far right and in the favor of Limbaugh and Beck otherwise they can’t get reelected.

E&P

July 27th, 2011
10:26 am

“From 2003 when the Bush tax cuts were implemented, we shed hundreds of thousands of jobs. If you don’t believe this go to the DOL website and look at the graphs.”

This is completely false. Straight from the DOL/BLS website – chart A-1: historical employment status of civilian noninstitutional workforce over age 16.

Civilian Employment in 2000: 136,891,000
Civilian Employment in 2003: 137,736,000
Civilian Employment in 2007: 146,047,000
Civilian Employment in 2010: 139,064,000

Those who would say the country didn’t add any jobs during the 2000’s would be incorrect. Those who would say, as Deborah does, that after the tax cuts were implemented in 03 that we shed hundreds of thousands of jobs, would be incorrect.

Correlation does not equal causality, but there is an undeniable upward trend in employment from 2003 for the next few years until 2007.

Fletch

July 27th, 2011
10:30 am

E&P – “Correlation does not equal causality, but there is an undeniable upward trend in employment from 2003 for the next few years until 2007.”

And by coincidence, those 4 years also reflect the peak of the housing and lending boom. I’d bet even money if you looked at the sectors with substantial growth, they would be Real Estate, Construction and Mortgage Lending.

David Franke

July 27th, 2011
10:38 am

I agree with your call for more competition among credit rating agencies. Actually there IS competition–Weiss Ratings (weissratings.com). Unlike the Approved 3, Weiss has no business relationships with the firms it rates. And it has an excellent track record. You might also be interested in what they say about the sovereign debt of the United States: They recently lowered the U.S. to a C-minus, the same level enjoyed by Egypt and Argentina (scary, no?). This had nothing to do with the debt limit fight in Congress, but with our high level of debt. So, why don’t we see them mentioned along with the Approved 3? There’s no doubt in my mind that it’s because the authorities do not want the public to know the truth about our financial condition.

Kyle Wingfield

July 27th, 2011
10:40 am

redneckbluedog: No variations on “tea bag,” as a reference to tea partyers, are allowed on AJC blogs.

E&P

July 27th, 2011
10:41 am

Fletch,

I would agree that real estate and construction would be areas of meaningful employment growth during that period. 2003-2007 also corresponds to a boom in leveraged buyouts and M&A activity. Housing was far from the only industry doing well during that period of time.

Fletch

July 27th, 2011
10:43 am

Sen. Phil Gramm (R, Texas), Rep. Jim Leach (R, Iowa), and Rep. Thomas J. Bliley, Jr. (R, Virginia), the co-sponsors of the Gramm–Leach–Bliley Act. Which was unfortunately signed into law by then President Clinton.

This is where the Glass Steagall Act was repealed. – The Glass–Steagall Act prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company.

The Gramm–Leach–Bliley Act allowed commercial banks, investment banks, securities firms, and insurance companies to consolidate. For those paying attention, this is where the bubble started before imploding in 2007.

The above is not intentioned to be political, merely factual.

Bart Abel

July 27th, 2011
10:48 am

Weiss Ratings isn’t independent. Until recently it was owned by none other than Jim Cramer, infamous for misleading his viewers. Cramer sold the company back to its founder, Martin Weiss, who himself has paid millions in fines for misleading investors.

The fact that a mouthpiece such as Weiss gets news coverage for downgrading U.S. Treasuries to near-junk speaks to the quality of today’s media more than it does to the quality of U.S. Treasuries.

Intown

July 27th, 2011
11:03 am

Kyle – interested in your thoughts on the economic model of rating agencies. Don’t the firms and governments being rated have to pay for the privilege of the rating? might that contribute to the coziness? Is it appropriate for rating agencies be a private sector function?

Why not? He knows everything already.

July 27th, 2011
11:13 am

Dubya the Dumb ” ” Idiot Messiah” “Duhbya” “Obozo”

Well I think I see the problem with this country. If you can’t even respect the other side to call them by their actual name, especially THE PRESIDENT(!), then ALL OF US are in trouble.

Once all of us realize that the problem IS ALL OF US, then the solution will no longer be to “blame the other”, but to move forward with real solutions of cutting spending and increasing revenues.

True enough, Logical Dude, but then Little Barry Bailout would have nothing to say. And since he knows it all, where would that leave us?

Fletch

July 27th, 2011
11:28 am

why not? – “Well I think I see the problem with this country. If you can’t even respect the other side to call them by their actual name, especially THE PRESIDENT(!), then ALL OF US are in trouble.”

Precisely why in Robs Rules of debate it is considered inappropriate to address your opponent as dumba$$ or $%ithead.

Lil' Barry Bailout

July 27th, 2011
11:53 am

And since he knows it all, where would that leave us?
———

Sadly misinformed, that’s where.

mehlman rings twice

July 27th, 2011
12:18 pm

Byteme @ 9:25 am:

Your post reminded me of an exchange I had with the head of a small investment firm in January 2009. He told me that a group of leader of small firms warned White House officials in the Bush Administration about allowing big investment firms to leverage higher than previously agreed upon limits but was summarily ignored and shown the door. The result was that the public, impressed by higher returns, shifted their investment funds from smaller firms to riskier funds held by the bigger houses. When the SEC tried to finally reign in the excesses, the heads of the bigger firms, some of them Bush’s classmates and biggest contributors, lobbied the WH to call off the dogs.
When the crisis ensued, the big investment houses and the WH needed cover. The Bush White House, realizing they were in uncharted territory, convened two presidential candidates at the White House in the fall of 2008, and realizing that John McCain didn’t have a clue as to what was happening, then directed Henry Paulson to design the TARP bailout. Not wanting to be the fall guy, Paulson then gave the task to a committee led by Timothy Geitner.

Jack

July 27th, 2011
12:43 pm

Let me preface my remarks that, as an economic conservative, I do not see the democrats as being any viable alternative as candidates on my ballot.

That being said, I am overwhelmed with joy to see the “lame stream” republican party moving toward nothing more that a likely third party alternative that puts forth candidates that are “compromisers” and continue to run on social issue promises that never materialize.

This party of Romney, Boehner, Cantor, McConnell, etc. has given way to the new political party of “hell no” principaled economic conservatives who mean what they promise.

Most likely, the new economic conservatives will retain the the republican party name and the old “lamestreamers” will either have to bring up the rear of the new party or go form their own political party.

This is a grand time to be an economic conservative. Sure, my Wall Street investments are in for a bumpy ride for the next month or two but I will gladly shed a few dollars of investment to also shed the Bush\Romney\Boehner\McConnell party from the new conservative party.

MrLiberty

July 27th, 2011
1:37 pm

Go to http://www.usdebtclock.org and look for yourself at the current US deficit, debt, and unfunded liabilities. A whopping $100 Trillion give or take a few hundred billion. What sort of credit rating would YOU give such a financial statement??? F-? Does the rating system go that low? Super junk rating? Maybe that is more appropriate. Skid Row/Banana Republic rating?

Face it folks, the republicans and the democrats have destroyed this country’s economy. While a handful of folks like Ron Paul have courageously spoken out and voted consistently against all of these welfare/warfare programs, the vast majority have simply voted party line to increase the size and cost of government. And every dollar owed is simply backed by the future hard work and sweat of those of us who work for the voluntary, productive, private sector.

If it weren’t for the Federal Reserve and the military and political threats backed up by our CIA and Military, nobody on earth would be continuing to prop up the dollar or our reckless spending ways.

Everyone is worried that interest rates might rise. They SHOULD. Money isn’t free. The problem is that the Federal Reserve has made everyone believe that it should be. The cost of money is an important aspect of a functioning economy. It send signals to investors, savers, business folks, and consumers. When the supply of money and the cost of money are manipulated as the Federal Reserve does, you get bubbles and malinvestment. The unsustainable bubble eventually bursts and then you get recessions and depresssions. These “painful” periods are not the problem, but rather the correction. It is the bubble that is the problem.

A poor rating that makes borrowing by the criminals in Washinton more expensive would be an OUTSTANDING thing. It would finally force them to cut, cut, and cut some more.

The sooner america faces up to the misery their congresses and their presidents (going all the way back to 1913) have cause them, the better we will all be.

MrLiberty

July 27th, 2011
1:41 pm

Wow, my mistake. I guess its been a little while since I checked out the totals. Now we’re at nearly $115 Trillion. Only makes my points even more sound. I see only $1,027,000 per taxpayer in unfunded liabilities. You’ve got that sitting around burning a hole in your pocket, right???

Pretty soon the world will wake up to how much we owe, how we can never pay it back, and the dollar will collapse. When that happens we will all look back on the conditions our grandparents faced during the first Depression with great fondness and envy.

Filter

July 27th, 2011
2:17 pm

Jack,

So we get a “hell no” my way or the highway group that you like, then the other side gets a “hell no” my way or the highway group that they like (because whether you want to admit it or not neither side speaks for everyone) and exactly where does that gets us. And your not thinking straight if you think that a default or even a downgrade is simply going to result in your “Wall Street investments are in for a bumpy ride for the next month or two.”

Voters like you don’t win elections just as hard left voters don’t win elections. It’s the vast middle, the independents that do. So go ahead, throw your hat in with the “hell no” cabal, be it on the left or the right. The end result will be a seat at the children’s table while the adults handle business.

Linda

July 27th, 2011
2:34 pm

The rating agencies showed up late–again? We needed the rating agencies to tell us we had too much debt & to threaten us with a downgrade?

The American people have been protesting ever since the Obama & the Democrats spent almost one
TRILLLLLLLLLLLLLLLLLLLION DOLLARS on the failed economic stimulus bill. The American people could see the writing on the wall. They were right. We saw another TRILLLLLLLLLLLLLLLLLLION
DOLLARS spent to take over our health care. We saw a TRILLLLLLLLLLLLLLLLION , SIX BILLION DOLLARS spent to save the housing market. It never stops. Obama wants to spend another TWO
TRILLLLLLLLLLION DOLLARS on infrastructure to his union buddies.

I’m surprised we were not downgraded a year ago. We are lucky we received an advanced warning. We don’t deserve to have a triple A rating. The debt is unsustainable. We knew it. The rating agencies merely agreed.