The game of political chicken kabuki needs to come to an end, and soon -- because Moody's just put the hammer down on all the children.

NY Times:

Moody’s Investors Service warned Thursday that it might downgrade the United States government’s sterling credit rating if Congress did not increase the nation’s debt limit “in coming weeks,” putting a spur to the sputtering talks between party leaders and the White House on a plan to restore fiscal stability.

The warning, from one of the agencies whose assessments of creditworthiness help determine interest rates, amounted to a stern reminder from Wall Street to Washington that global financial markets are watching the budget battle closely and that a standoff or brinkmanship could have economic consequences.

Both sides seized on Moody’s statement to reinforce their bargaining positions, with Republicans demanding that President Obama get more serious about deep spending cuts and Democrats saying that Republicans are risking a financial crisis in pursuit of an ideological agenda.

Moody’s said a review of the credit rating was “likely” in July, given that “the risk of continuing stalemate has grown.” Its warning followed a similar one from another major ratings firm six weeks ago, and it came as the administration met Thursday with both House Republicans and Democrats in search of a deal.

As John Boehner assures the press that "nobody out there believes the U.S. is going to default on its debt, " he should tell his freshman Tea Party reps that the debt ceiling doesn't work the same as a last-minute government budget deal. It needs to get done in a timely fashion. The debt ceiling has never been a point of political wrangling or as polarized as it is now, it was just done. The press knows this for sure, but since Bush was in office then, Republicans passed it with no cares about the federal deficit. What sick times we live in.

And by the way, maybe Fox News will report this part of the federal deficit story:

Independent analyses have shown that more than half of the $14.3 trillion debt is from policies enacted during the past decade when Republicans controlled both the White House and Congress, and much of the rest from lost revenues and stimulus spending and tax cuts since Mr. Obama took office at the height of the financial crisis and recession.

And as we're mired in a slow recovery, failing to raise the debt ceiling is the worst thing that could happen to our country at the moment.

The full faith and credit of the United States is being questioned for the first time in its history. When that questioning turns to a lack of faith in this nation to pay its bills, pray.

I pray that Biden's group doesn't succumb to the pressure from Republicans and come out with some 'grand bargain' compromise over this which cuts benefits to our safety-net programs. Seniors will be devastated and all the gains the Democratic party have made this year against a backdrop of fools and lunatic right-wing governors will be lost. As usual, the Villagers have their own talking points too.

Last night David Gergen parroted the conventional wisdom that says while the economy may be getting worse the president simply must agree to build in long-term debt reduction with the entitlements right now. He didn't say why.

So that's that.

DOWNLOADS: (287)

PLAYS: (1450)

Embed

I’m going to comment on the President’s budget speech in a minute, but first I want to highlight something happening on Capitol Hill today that really ties together the Republican governing philosophy.

There is a certain rich irony in Darrell Issa bringing Wisconsin Gov. Scott Walker to the Capitol for a hearing on how Moody’s has boosted Wisconsin’s credit rating because of the union busting measures Walker has been pushing in the state. So in one sentence, you have a leader of the House Republicans that are trying to do away with Medicare and Medicaid, the governor who most personifies the attempt to crush collective bargaining in this country, and one of the principal companies at the dead center of the fraud on Wall Street that brought down the world economy. They should take their show on the road. You could entitle it “Cruelty, Arrogance, and Fraud: How to Dismantle the American Middle Class in Three Easy Steps.”

Issa, Walker, and Moody’s belong together. This is all one story — the story of a relentless assault on the working middle class and those desperately trying to gain a foothold on the ladder up to it.

Now there is nothing the least bit notable about two right-wing Republican politicians hanging out together — that happens at every exclusive country club in America. But touting the new ratings upgrade Moody’s just gave to NYC is like having a guy just convicted of murder as your character witness in the case over in the next courtroom; he might say nice things about you, but he doesn’t bring much credibility to the table. Moody’s is one of the least credible companies in America right now, condemned yesterday in a Congressional report for their pivotal role in the financial crisis. Their collusion with the biggest Wall Street firms in issuing thousands of AAA-bond ratings to sub-prime derivatives that were basically junk was, as much as any other factor, at the heart of the fraudulent bubble that caused the financial collapse of 2007 — a collapse that caused the loss of trillions of dollars of wealth to pension funds, foundation and church endowments, and individual stockholders. Remember, AAA-rated stocks are supposed to be the safest of the safe, as safe as sticking your money into a savings account in an FDIC-insured bank. Pension funds, church and foundation trustees, state and county treasurers are all looking for investments that are absolutely safe, completely reliable, and they depend on Moody’s to tell them what those investments are. They are fine with accepting a lower rate of return because they want their investments to be safe. But the culture or reliability and integrity and honest numbers crunching at Moody’s eroded badly in the late ’90s and early 2000s, and with the pressure of the big Wall Street banks pushing them to do it or lose business, they started ginning up the ratings of these junk bonds to assure getting more business from the big boys. As much as any other single thing, this line of corruption going from the big banks to Moody’s and the other bond ratings companies set the financial industry, the housing market, and all of us up for the big fall.

Now this same company is playing political footsie with politicians like Scott Walker and Darrell Issa. It’s financial fraud and political fraud all wrapped up in a nice little package. There is nothing about what Scott Walker is doing — giving huge tax cuts to big business while crushing unions and cancelling infrastructure projects — that will help make Wisconsin’s finances or economy stronger in the long run. If you destroy middle-class jobs, drive down working families’ pay, and give more tax breaks to your big business friends, all you end up with is a third-world economy. There is nothing about what House Republicans are doing that will give our federal budget more stability, because if you give $4.2 trillion in tax cuts to millionaires and big business while taking away Medicare, Medicaid, and all the other programs that help support working middle-class families, you will have neither a balanced budget (the House Republican budget won’t come until balance until 2040, and that’s only if we have 2.8 percent unemployment, so it will never come into balance), nor a strong economy.

Which brings me to the president’s speech yesterday. Like I said, this is all one story.

Continue reading »

Would that be Moody's, the same rating agency that certified big steaming piles of mortgage manure as Triple AAA-rated securities and collapsed the international economy? I guess this means that Wall Street wants us to cut the deficit, huh. Well, I'd say what's good for Wall Street is bad for America:

The United States and other top world economies need to make potentially painful government spending cuts or risk losing the high-grade credit ratings that have kept borrowing affordable, the Moody's rating agency said Monday.

Moody's warns nations to cut spending or risk AAA ratings

European officials hold off on bailout package for Greece

Outlining the dilemma faced by policymakers in the United States, Great Britain, Germany and France, Moody's said that debt levels in the four large credit-worthy economies had reached the point at which they are at risk of being downgraded -- a step that would drive up interest rates, increase borrowing costs and mark a turn in perceptions about the world economy.

Economic recovery might ease the problem by increasing tax revenue, Moody's reported, but "growth alone will not resolve an increasingly complicated debt equation. Preserving debt affordability at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion."

The dollar rose against major currencies despite the report, a reminder of its continued role as the world's reserve currency.

The agency said a downgrade did not appear imminent and expressed confidence that the four countries would come to grips with their fiscal problems. Germany, the report said, has included a new debt provision in its laws, and the United States has established a commission on spending reform.

The next time some bobblehead starts talking about how this crisis "is about people living beyond their means", remind them of this latest proof that the financial services industry was thoroughly and aggressively corrupt, and that was a much bigger problem:

WASHINGTON -- As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.

A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings.

Instead, Moody's promoted executives who headed its "structured finance" division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now: "toxic assets."

As Congress tackles the broadest proposed overhaul of financial regulation since the 1930s, however, lawmakers still aren't fully aware of what went wrong at the bond rating agencies, and so they may fail to address misaligned incentives such as granting stock options to mid-level employees, which can be an incentive to issue positive ratings rather than honest ones.

The Securities and Exchange Commission issued a blistering report on how profit motives had undermined the integrity of ratings at Moody's and its main competitors, Fitch Ratings and Standard & Poor's, in July 2008, but the full extent of Moody's internal strife never has been publicly revealed.

Moody's, which rates McClatchy's debt and assigns it quite low value, disputes every allegation against it. "Moody's has rigorous standards in place to protect the integrity of ratings from commercial considerations," said Michael Adler, Moody's vice president for corporate communications, in an e-mail response to McClatchy.

Insiders, however, say that wasn't true before the financial meltdown.

"The story at Moody's doesn't start in 2007; it starts in 2000," said Mark Froeba, a Harvard-educated lawyer and senior vice president who joined Moody's structured finance group in 1997.

"This was a systematic and aggressive strategy to replace a culture that was very conservative, an accuracy-and-quality oriented (culture), a getting-the-rating-right kind of culture, with a culture that was supposed to be 'business-friendly,' but was consistently less likely to assign a rating that was tougher than our competitors," Froeba said.

After Froeba and others raised concerns that the methodology Moody's was using to rate investment offerings allowed the firm's profit interests to trump honest ratings, he and nine other outspoken critics in his group were "downsized" in December 2007.