Monday, August 8, 2011
U. S. Senators Unsheathing Their Knives on S&P
Standard and Poor’s downgrade of the United States credit rating may have just opened a can of worms that they didn’t intend to happen. It is now rumored that the political powers that be in the U.S. Senate are unsheathing their knives and are coming full throttle for the throat of this rating agency.
Moody’s and Fitch are wisely sitting on the sidelines waiting for the inevitable bloodbath. None of these credit ratings agencies are innocent in the housing bubble that burst not only America’s economy, but that of the world.
All three are guilty of killing legislation that would have set a precedent. In 2002, the state of Georgia passed the toughest predatory lending law in the country. Standard and Poor’s helped lead the crusade to squash it. The book Reckless Endangerment describes the actions of S&P:
Standard & Poor’s was the most aggressive of the three agencies, however. And on January 16, 2003, four days after the Georgia Assembly convened, it dropped a bombshell. Because of the state’s new Fair Lending Act, S&P said that it would no longer allow mortgage loans originated in Georgia to be placed in mortgage securities that it rated. Moody’s and Fitch soon followed with similar warnings.
It was a critical blow. S&P’s move meant Georgia lenders would have no access to the securitization money machine; they would either have to keep the loans they made on their own books, or sell them one by one to other institutions. In turn, they made it clear to the public that there would be fewer mortgages funded, dashing the “the dream” of homeownership.
Folks, you’d better get your popcorn and drinks ready; because we are about to witness the cannibalization of all the bastards who’re responsible for the implosion of our economy.
Reckless Endangerment How Outsized Ambition, Greed, and Corruption led to Economic Armageddon