Sean Connery explains “The Chicago Way” to Kevin Costner.
Less than two weeks after Standard & Poor’s issued the historic first U.S. credit downgrade, the Justice Department confirmed Wednesday it is investigating the ratings agency over the method it used to rate mortgage securities in the years before the 2008 financial downturn.
The Associated Press notes “it was unclear” whether the other two major ratings agencies, Moody’s Investors Service and Fitch Ratings, are under investigation for similar wrongdoing. Taking no chances, Fitch reaffirmed America’s AAA credit rating just one day earlier.
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The investigation has the appearance of retribution. The New York Times reports, “The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action.” Impugning S&P’s credibility could deflect blame from the Obama administration’s profligate spending and prodigious deficits.
The Establishment media lost no time tying these stories together or using the term “retaliation.” Unfortunately, they claim the credit agency lowered America’s credit rating as revenge for this investigation. A CBS News story by Stephanie Condon demonizes Standard & Poor’s while weaving a conspiracy theory behind its recent actions. CBS begins by quoting Columbia University law professor John Coffee, who said, “Much of the American public thinks S&P is a traitor to the country and the Benedict Arnold of rating agencies.” The impartial journalist Condon continues, “That’s not to say Americans don’t have good reason to feel betrayed.” Citing only Jane Hamsher of the far-Left Firedoglake website, Condon asserts, “Some are charging S&P downgraded the U.S. to ‘bully’ the government — to ward off regulatory action against its role in the 2008 financial crisis, or in retaliation for the Wall Street reforms.” (Condon’s story includes other sterling insights, such as, “it is impossible for the U.S. to default on its loans unless it chooses to do so.”)
Some hope downgrading S&P’s capital will create a structural change in the way the nation’s credit is measured. The Times notes, “A successful case or settlement against a giant like S.& P. could accelerate the shift away from the traditional ratings system.”
That may prove critical for Obama to maintain the façade of fiscal health in years to come. The chairman of Standard & Poor’s sovereign debt ratings, John Chambers, has said the Obama downgrade may last until 2029 — if politicians implement measures to reduce our ratio of debt-to-GDP immediately. The agency has warned of further downgrades, to at least AA, if national indebtedness is not controlled. Moody’s issued a coded threat that the debt ratio would have to come down to 73 percent by 2015 “to ensure that the long-run fiscal trajectory remains compatible with a AAA rating.” (S&P warns in its more pessimistic scenario, debt will reach 101 percent of GDP in 2021.) Apparently, the administration views devaluing the credit ratings agencies as a prelude to devaluing the credit rating itself — because Obama opposes the fiscal responsibility necessary to keep us from becoming as a second-rate economy. By the time he can no longer strong-arm Moody’s and Fitch to certify the United States as AAA, he hopes it will no longer matter.
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ABC’s Jake Tapper reported just before the downgrade that the administration thought it could prevent S&P’s decision with a media “pushback” over an alleged $2 trillion math error. (In fact, there was no error; S&P simply did not trust Congress to keep its word. Sage advice.) Having failed to intimidate its analysts then, the agency joins Sheriff Joe Arpaio, Catherine Papoi, Christopher Coates, and the entire State of Arizona as political enemies receiving the full fury of an activist federal government gone berserk.