Saturday, July 30, 2011

Even A Broken Clock Is Right Twice A Day

Rep. Dennis Kucinich (D-Ohio) is not particularly well-known for his solid, feet-on-the-ground ideas. But this time our alien abductee has done something that makes perfect sense. In the middle of the ongoing crisis over the budget and the debt-ceiling, the major credit-rating agencies have been making a bad situation worse with their doom and gloom predictions.

Kucinich has asked the United States Justice Department to investigate those selfsame credit agencies. Kucinich is attacking the agencies from the left, of course, but that doesn't make the need for an investigation any less real. Moody's, Standard & Poors and Fitch, who are now threatening to downgrade the credit rating of the United States, are the same people who gave A+ to AAA ratings to the very financial institutions which brought about the stock market and mortgage crashes. They sounded like the mouthpieces for Rep. Barney Frank (D-Massachusetts) who was declaring that Fannie Mae and Freddie Mac were in great shape. Frank was in bed (literally) with one of the executives of Fannie Mae. With the credit agencies joining them, that bed must have been very crowded.

Says Kucinich: "We are not a poor country. We're the richest country in the world and to tempt the markets to further manipulate us--these, these ratings agencies--there ought to be a Justice Department investigation of them." Along with the threats of a downgrade if a bill isn't passed soon, Kucinich may be on to something, though he may have its meaning wrong. There are strong but so far unsubstantiated rumors that the credit agencies are willing to back off if the Senate adopts the Reid plan proposed by Sen. Harry Reid (D-Nevada) over the Boehner (R-Ohio) plan in the House. Given that we don't even know what either plan really entails from minute to minute, why Reid over Boehner?

Kucinich says "[The agencies] were for sale for anyone who wanted a good rating. You put your money down, you get a good rating. Now they're telling the United States of America that they're going to downgrade our rating. Are you kidding me? It's time for us to downgrade the rating agencies." There's a lot of truth in that statement.

Naturally Kucinich, a kooky leftist, blames the influence of evil capitalists buying off the agencies for the current threats. But he forgets another important group which exerts at least equal influence, and that is powerful Democrats with their own private profit-motives and political needs who are more than willing to threaten the agencies right back while colluding with them at the same time. See Barney Frank and Harry Reid, above.

I agree with Kucinich on the need for an investigation of the agencies, though for somewhat different reasons. It may also be too little, too late. Still, the major flaw in his argument is that it would be Eric Holder's Justice Department which would be doing the investigating. That's a little like O J Simpson investigating his wife's murder. Holder's highly-politicized Justice Department is not going to do anything to upset the Democrats' plan to exploit the crisis.

The agencies might even be right in warning of a looming negative credit rating. But like the thirteenth strike of the clock, all that went before it is called into question. And like the broken clock, Kucinich may be right for the wrong reasons. Meanwhile, the other tick-tock continues. Where is the budget? Where are the adults? Where is the solution that would stave off further economic crisis and put the lie to the agencies' threats? Where are the statesmen who can produce principled compromise?

And those are my final horological metaphors.

12 comments:

Tennessee Jed said...

Hawk - as we have so often discussed, liberal theology seems to trump all else when it comes to political "strange bed fellowsmanship." My first instinct would be that some folks who are members of the non-partisan journal integrity watchdog group formerly known as "journolist" started this rumor for the same reason spin and polls are floated. That is, "print and or restate the rimor enough times and maybe, just maybe, it will come true.

It would be fun to pressure those stories for their "sources" just to see what the true genesis is. I have no idea how to do that, of course, but fun nonetheless. On that subject, liberals have long cried out for protection against "whistleblowers." I have always had just the opposite reaction and it somewhat gets to our recent discussions about online identities. If you want to "leak" information to journalists, have the guts to stand up and admit who you are. Otherwise, it permits ideological journalists to selectively determine who to smear.

LL said...

The rating agencies are a sad joke - Both Moody's and S&P. If you'd ever dealt with them personally, it would be confirmed. When Orange County CA went BK in 1994, they'd been giving them AAA ratings right up to the collapse even as the broker/dealers knew that the tent was folding. I interviewed reps from both agencies and dealt with them -- and they did not inspire confidence.

Anonymous said...

Tennessee: You theory is as good as any, and we do know that the liberals at Journolist are in sync with the crowd that believes in creating a crisis, then exploiting it (the Cloward-Piven strategy).

Putting out your true identity when leaking does seem a whole lot less sneaky, but I don't like information leaking in the first place. A genuine whistleblower isn't leaking anything. He or she is actually confronting the company or the agency with their own deception. That requires guts, and in some case, heroic patriotism. True whistleblowers are to be admired, leakers are just thieves.

Anonymous said...

LL: Nice to have confirmation from someone who has actually dealt with these agencies directly. I remember much the same thing when Equity Funding went under, taking the pensions and retirement funds of oil company employees with them. They had also received recent high ratings from the big agencies. That scam wasn't even very sophisticated, yet the auditors didn't catch the unverified hand-entries that the company's primitive computers also missed. $475 million in life insurance and $100 million in mutual funds supporting the retirements disappeared overnight in '73. That's small by today's standards, but it was disaster for thousands of innocent investors.

I remember the scandal because I was in law school and working in the contracts department at Equitable Life at the time. Our company, totally unrelated to Equity Funding, took a big hit simply because of the similarity of the company names. The Equitable is now part of the AXA group.

T-Rav said...

Wow, who knew hobbits (not McCain's "Tea Party hobbits," of course) could come up with such ideas? I also agree to some extent with what he's saying, but I worry that to start an investigation now might have negative effects. It could look like the government is bullying the credit agencies in order to stave off disaster, and nothing more. Still, some action along these lines should probably be taken.

Joel Farnham said...

Kucinich may be on to something. I wonder how many Credit Ratings people got a job with the Obama Administration this last year. Or with the DNC. Investigate the administration first. Then check the credit agencies.

AndrewPrice said...

The rating agencies are a disgrace. They completely missed all the warning signs before the 2008 crash. They've piled on to people well after the fact and when they were on the road to recovery, and they got caught having financial interests in some of the people they failed to downgrade.

I think their threat to downgrade now is stupid. The reason to downgrade is risk of default. Despite the current situation, the US is not a genuine default risk.


(T-Rav, Check your e-mail...)

Anonymous said...

T-Rav: I tend to agree. It's part of why I said "too little, too late." Maybe it should be "just enough, too soon." It could be an unnecessary diversion right now, but like so many other things, I have hopes after the 2012 elections.

Anonymous said...

Joel: Alternatively, how many people from the Obama administration got jobs with the credit agencies? It's looking like a very incestuous relationship. But as I said to T-Rav, we're probably going to have to wait until after the 2012 elections to do anything about it.

USS Ben USN (Ret) said...

Excellent post LawHawk!

Lessee, the US is in debt up to our eyeballs with no plan to pay it off even decades from now, but if we don't borrow trillions of more money that we can't afford than these puke stains will downgrade our credit rating?

By pukestains I mean these agencies and the donks.
This is alarmist, leftist propaganda, plain as day.

Nice to see Kucinich finally get something right, even if it is for the wrong reason, lol.

Anonymous said...

Andrew: It probably wouldn't be so bad if the agencies had simply been mistaken, or caught unawares by unforeseeable conditions. But this was all predictable, and their cozy relationship with the banking and mortgage businesses (aka the Friends of Barney Frank) makes anything they say about the 2008 crash totally lacking in credibility. It wasn't a question of if the unsustainable phony mortgage market was going to crash, but when. If they had done an honest assessment in 2006-2007, the crash might have been minimized. The slightest down-tick in the economy was bound to cause the mortgage house of cards to collapse.

Anonymous said...

USSBen: Something tells me you don't much care for the credit agencies. LOL

They will of course be glad to maintain our current AAA rating if we allow our elected representatives to go even farther into debt while raising the debt ceiling. They can pull all their clever accounting tricks to make a good thing look bad and a bad thing look good, but this is just simple mathematics. If my credit to income ratio were as bad as the government's, I'd have a ZZZ rating (I think I just created that rating).

And I'd be arrested if I started printing money to cover my debts. I'd also be investigated for child-abuse if I spent the family's food money gambling with Chinese card-sharps and put my kids and their kids into debt for the rest of their lives.

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