Obama Administration Installs Citigroup Crony at S & P

Standard & Poor’s announced that a new president will be taking over its helm. Douglass Peterson of Citibank will replace Deven Sharma at the end of the year. The ratings agency came under heavy fire for downgrading U.S. bonds in early August. Now, rumors are circulating that the Justice Department is planning an investigation on the company’s mortgage backed securities practices:

The U.S. Justice Department is probing S&P and Moody’s over ratings of mortgage-backed securities, according to three former employees who said last week they were interviewed by investigators. The former employees asked for anonymity because the investigation is ongoing. The inquiry is a civil matter, two of them said.

The probe is the latest of dozens of government investigations and investor lawsuits targeting S&P and Moody’s over the top grades they assigned to bonds backed by subprime mortgages. The Financial Crisis Inquiry Commission called them“key enablers of the financial meltdown.”

That was predictable. As a matter of fact I made that prediction the night that S & P made the downgrade. I feel smart all of sudden. What an odd feeling.

Peterson was CEO of Citigroup Japan for 5 years. He has spent his career working for that company. For those of you who were paying attention to all of the 2008 bailouts, Citigroup was one of the biggest offenders. They used shady accounting practices that blindsided investors and the FDIC. The following quote comes from the book Reckless Endangerment:

Citigroups investors were stunned when the flood of losses and bad assets from entities they were unaware of began backing up onto its books. So were officials at the Federal Deposit Insurance Corporation who had had no idea how many risky assets the bank had shifted, artfully, from its balance sheet. Had the FDIC known about these conduits, it would have required Citigroup to set aside more of a capital cushion for potential losses before they hit, its officials later said.

And guess who came to the rescue? That’s right the same names that are sharpening their knives over S&P in the federal government:


The most recent slide in Citigroup stock comes on the heels of news earlier this month that the Treasury Department was abandoning its initial rescue plan to buy troubled assets from banks - Citigroup had been seen as a major beneficiary of that strategy.

Instead, as part of the $700 billion bailout package that was signed into law in early October, Treasury has focused on making direct investments in banks. In exchange for equity stakes, the agency has injected $25 billion into Citigroup and an additional $100 billion into eight other major U.S. financial institutions.

Top regulators, including Federal Reserve Chairman Ben Bernanke and Timothy Geithner, president of the New York Fed, were both involved in the weekend talks over Citigroup's fate. Geithner is expected to be nominated to be Treasury Secretary by President-elect Barack Obama

You can expect S&P to reverse that downgrade in the near future. That pesky little problem has been taken care of.

Source: http://money.cnn.com/2008/11/23/news/companies/citigroup/index.htm

http://www.bloomberg.com/news/2011-08-23/s-p-hires-peterson-to-restore-ratings-confidence-as-sharma-sets-departure.html

The Rise and Fall of The United States AAA Credit Rating

WTF is right!!

Fannie Mae and Freddie Mac Get a Downgrade

The two biggest leeches (other than General Electric) on the taxpayer’s purse just received a downgrade by S&P. Fannie Mae and Freddie Mac are completely dependent upon federal government largess. And after the U.S. received their reprimand from the ratings agency, it was appropriate that these two government sponsored entities should receive the same:

In downgrading Fannie Mae, Freddie Mac and several other U.S. government entities, S&P cited their dependence on federal support. Included in the downgrade were the senior issue ratings on debt issued by Fannie and Freddie, the giant mortgage-finance firms.

Of course, the feds stick firmly behind these two discredited dirt bags:

Edward DeMarco, acting director of the companies' regulator, the Federal Housing Finance Agency, said the government's commitment to support the two mortgage giants "remains unaffected by the Standard and Poor's action."

Can you say another housing bubble?

Source: http://online.wsj.com/article/SB10001424053111904480904576496672710450418.html

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.

Source: http://www.reuters.com/article/2011/08/08/us-usa-debt-congress-idUSTRE7775UO20110808

Reckless Endangerment How Outsized Ambition, Greed, and Corruption led to Economic Armageddon

Lil' Timmy Geithner: Welcome to the Downgrade!

Welcome to the recovery? Not according to the S&P, we have just been downgraded. It’s time for Lil’ Timmy Geithner to file for unemployment. And believe me; he shouldn’t get extended unemployment benefits either. As a matter of fact, Ben Bernanke should get a pink slip too.

Standard and Poor's Downgrades America's Credit Rating

Here it is folks; it was just a matter of time. Standard and Poor’s just downgraded the United States credit rating. I guess the “great compromise” by the D.C. swamp monsters didn’t fool anyone. The Washington Post reported the following:

Standard & Poor’s announced Friday night that it has downgraded the United States credit rating for the first time, dealing a huge symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.

Lowering the nation’s rating one-notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bi-partisan agreement reached this week to find $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would have no luck achieving more savings later on.

The decision came after a day of furious back-and-forth between the Obama administration and S&P. Government officials fought back hard, arguing that S&P made a flawed analysis of the potential for political agreement and had mathematical errors in its initial analysis, which was submitted to the Treasury earlier in the day. The analysis overstated the U.S. deficit over 10 years by $2 trillion.

“A judgment flawed by a $2 trillion error speaks for itself,” a Treasury spokesperson said Friday.

The downgrade will push the global financial markets into unchartered territory after a volatile week fueled by concerns over the European debt crisis and the slowdown in the U.S. economy.

Analysts say that, over time, the downgrade is likely to push up borrowing costs for the U.S. government, costing taxpayers tens of billions of dollars a year. It could also drive up costs for borrowing for consumers and companies seeking mortgages, credit cards and business loans.

A downgrade could also have a cascading series of effects on states and localities, including nearly all of those in the Washington metro area. These governments could lose their AAA credit ratings as well, potentially raising the cost of borrowing for schools, roads and parks.

But the exact impact of the downgrade won’t be known until at least Sunday night, when Asian markets open, and perhaps not fully grasped for months. Analysts say the impact on the markets may be modest because they have been anticipating an S&P downgrade for weeks.

Federal officials are also examining the impact of a downgrade in large but esoteric financial markets where U.S. government bonds serve an extremely important function. They were generally confident that markets would hold up, but were closely monitoring the situation.

S&P’s action is the most tangible vote of disapproval so far by Wall Street on the deal between President Obama and Congress to cut the deficit by at least $2.1 trillion over 10 years. S&P has said that it wanted at least $4 trillion of deficit reduction.

The downgrade is likely to be used as a weapon by both Republicans and Democrats as they argue the other side has not taken deficit reduction seriously.

Other credit rating agencies — Moody’s Investors Service and Fitch Ratings — have decided not to downgrade the United States credit rating. But they’ve warned that, if the economy deteriorates significantly or the government does not take additional steps to tame the debt, they could move to downgrade too.

In April, S&P first said it might downgrade the United States credit rating on concerns that lawmakers would not be able to come to a deal on reducing the debt. In July, as efforts stagnated, S&P said the odds of a downgrade within three months had moved up to 50 percent.

The ultimate deal between Obama and Congress ultimately failed S&P’s benchmark. Obama administration officials have been critical of S&P for making what was essentially a political judgment and for failing to conclude that the country was making a strong first step to reducing its deficit.

You can fool some of the people some of the time; but you can’t fool all of the people all of the time. Unfortunately, we have a bunch of fools in Washington D.C.

Source: http://www.washingtonpost.com/business/economy/sandp-considering-first-downgrade-of-us-credit-rating/2011/08/05/gIQAqKeIxI_print.html