Embarrassed Again -- Investigating Standard and Poors
Though I didn't like the affect it had on my retirement portfolio, I applaud Standard and Poors for having the courage to downgrade the US Government debt. The US Government is disfunctional at the moment. Congress didn't have the will to make the cuts needed to avoid exceeding the debt limit, and the Republicans with their commitment to never raise any taxes even if that means removing unfair loop holes preventing some from paying their fair share nearly took us to the brink of... well probably only a Government shut down.
I give President Obama the credit for preventing the worse case scenario, a sure thing had he left congress to do the job on their own. But either way, the behavior of congress was irresponsible. They even went on vacation without finishing the work on the FAA budget causing millions of dollars of revenue from being collected, making our debt situation worse, grant perhaps insignificant given the total deficit. And, people wonder why Standard and Poors downgraded the US. The question is why didn't the other rating agencies follow suit. I guess they didn't learn from the mortgage securities they rated AAA before they went bust pushing us into the recession in the first place.
To make it worse, now the Government is investigating Standard and Poors. And, the City of Los Angeles fired Standard and Poors after downgrading its debt. And, people have the gall to complain that the rating agencies have a tendency to rate high in order to maximize their own profit.
President Obama has only disappointed me a few times during his presidency. This is one of them. The second was when he decided to promote oil drilling on the East Coast, which of course was followed shortly by the huge oil spill.
Taking retaliatory action against rating agencies for downgrading debt is only going to prevent them from rating securities higher when they should be lower. It's bad policy for the US and it's bad policy for the City of LA.
Magobrillo
2 comments:
Well Magobrillo, I can't say that I share your view of all this. Which is actually nice because it shows that two people with similar liberal values can still have very different viewpoints. I think Standard and Poors has a lot of nerve to first take money to inflate the ratings of worthless securities so that everyone investst their money in it, thus causing the first financial crisis of 2008, then turn around and downgrade our credit rating, the result of which is the temporary destablization of the stock market. The funny thing is that most investors are pulling their funds from the stock market and buy US Treasuries! That's because the safest thing to invest in is the USA and Standards and Poors ratings is really a symbolic statement that they have made as a judgement to the political process. I don't disagree that the political process is shameful, but Standard and Poors has no more business in artificially lowering the USA credit rating that they had in artificially inflating the mortgage securities rating. As far as the retaliation goes, maybe the motivation is wrong, but the action is right. They should have taken down all these ratings agencies when the 2008 crash occurred. The US is simply saying, we played ball with you then you screwed us now we're going to screw you. I have no problem with that. I'm not embarrassed, I'm outraged! (As much as a liberal can be ;)
As for Obama, I think I understand what he is trying to accomplish but I think he over estimates the congress. He should have announced that he preferred a congressional solution but would use the 14th amendment as a last resort to ensure that the US debt would be honored and no default was possible. This would have calmed those worried about the debt ceiling issue and its impact on the economy. He would have removed this as the immediate leverage of the tea party and more than likely a better resolution would have been made to increase the debt ceiling. There may have been a court battle but I doubt it would override the constitution. Obama wants to push the concept of compromise which I think is good, but he is compromising too much and it is not necessary.
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