The awful truth about the role of the credit rating agencies in bringing about the financial panic and great recession is out. The credit rating agencies were not journalists or newscasters or issuers of mere opinions, as they like to suppose in order to evade responsibility for their malfeasance. They were imposters, advertising agencies in disguise, and the dealers who hawked the poisonous securities they rated were fraudsters. Figuratively speaking, fool’s gold was stamped as pure gold by expert assayers who intentionally put their heads in the sand and their asses in the air and became the prospectors’ prostitutes.
More civilly speaking, the credit rating agencies deliberately gave risky asset-backed securities high, investment grade ratings so the toxic assets could be lawfully invested in by regulated investment institutions, whereupon the rating agencies collected handsome fees for their government-sanctioned seals of approval. Again and again the credit rating agencies disregarded their duty to do due diligence, abandoned common sense to cultivate ignorance, conveniently assumed facts, recklessly and fraudulently evaluated the risk associated with the securities, and employed worthless mathematical models to inflate values in order to make tons of easy money for themselves, knowing all along that a great deal of damage was eventually bound to be done to a great number of people. The rating scheme itself was insane, but the people involved were logical enough: If someone called a spade a spade, she would be fired, but if he called it a diamond, he would be overworked yet make a bundle.
By golly, the rating agencies were selling ratings and sinners were snapping them up as if the ratings were catholic indulgences. With plenty of money around to be had on loan, who would not like to buy a good credit rating? As long as the Ponzi scheme is kept up and enough people do not get wise enough to cash out all at once, everyone may come out a winner and go to heaven, or so it seems if you have enough faith in the numbers on your fraudulent statements.
After all, Bernie Madoff was giving people what they wanted. That peculiar smile on his face after he got busted was over the irony of it all, that the fools do not want to know that capitalism is inherently corrupt and that its financial system is fraudulent and depends on faith in money if not Mammon. No one is without sin, and even the worst sinner, who is naturally the highly respected and envied person at the top of the heap, may be redeemed, along with the poor folk who bought into the home ownership dream and took out mortgage loans they could never afford to pay off unless the value of their homes kept going up. We might not feel very sorry for the subprime victims who did not read or could not understand the convoluted terms of the adhesion contracts they were signing, but now literally innocent people are losing their jobs and have to default on their prime obligations because of the colossal confidence game fomented in the highest ranks of society. Naturally the anarchist would claim that no one with a social security number is innocent enough to be spared the busting consequences of the BOOM.
Your average creditworthy breadwinner had never heard of investment grade securities backed by pools of subprime mortgages, but now she and he has had its meaning driven home in the form of unemployment and foreclosure. Yes, now they know about the malfeasance of the credit rating agencies, and they would have justice done unto them, for the negligent, reckless and fraudulent misrepresentations by the credit rating agencies are at the heart of the financial calamity that brought our advanced civilization to its economic knees to pray to big government for salvation, as did Treasury Secretary Henry Paulson when he took to his knees to plead with House Speaker Nancy Pelosi.
Where there was some tangible collateral, like real estate, its value had been artificially inflated, thanks in part to the willful negligence and unmitigated greed of the elite who control all three branches of government. Those so-called branches of the United States government are really one, just as the father, the son, and the holy ghost are one god. The distinctions made in the latter are logically absurd, for three cannot equal one, nor can absolute power be logically divided. To wit, the figmental branches of government are an artful illusion governed by a continuously colluding power elite whose conspiracy belies the popular notion that the singular government is a democratic multiplicity. As for the mainstream corporate press, the so-called forth branch of government, it functions, like the credit rating agencies, mainly as a sycophantic advertising agency for the monolithic establishment, and it would be no means have the system that pays it overturned although it does aid in the changing of the guard from time to time.
However that may be, the inevitable bursting of the bubble was bound to leave the assets underwater. The perpetrators were inundated with a great flood of money in hopes that replacing con-money with play-money would enable them to keep their houses above water. “Tear down your houses and use the timber to build rafts!” is the ancient warning from Sumer. The consequences of this bust may still be of biblical proportions, which might give radical minorities some leeway to liquidate blameworthy public figures and public officials. Several leading personal causes of the debacle the nation presently suffers still hold high offices under the guise of Senator Obama’s token CHANGE, which at most means no more than Senator McCain’s token REFORM, i.e. a tweaking of the engine so that the power elite may do business as usual, instead of the radical change and reform needed to save the revolution. Only ten-percent of the colonial population was in favor of the American Revolution. History teaches that populations can endure a great deal of poverty for a long time, but not if expectations have been raised for long. Unemployment now exceeds ten percent, and real unemployment double that, in a country with traditionally high expectations and more than a taste of prosperity.
Most of the blame has historically fallen on the leaders because few leaders write histories, so pardon us if we would fain follow that tradition, however unwittingly. We are not surprised but are duly outraged by their misconduct. Law abiding Cuban Americans might rhetorically shout “Al paredon!” and we might join them and call for the nonviolent overthrow of the corrupt government residing in the nations’ houses of ill repute while preserving the pristine state. As if that were possible, for the corporatists – an euphemism for fascists – would invoke emergency powers to suspend the democratic process, and call out the National Guard if need be. Still it is a wonder that the exploited populace has not taken up arms, erected guillotines, torn out corrupted hearts, mounted willfully ignorant heads on pikes, nailed spectacularly dishonest political heads to rostrums, and revived the call for the extermination of lawyers who legalized the vice and the judges who condoned it. Instead, we see the same heads who talked people into the fraud hawking yet more poison as a remedy. Are Americans gullible, or just too darn nice for their own good? Why is it that they work against their own interests, literally march against themselves, and rate a frustrated fascist leader a socialist because of his sheepish talk and color of skin?
As for the credit rating agencies that put the seal of good housekeeping on the gigantic defrauding of the people, are these swindlers to get away with the booty? There ratings were not news at all but were false commercial advertisements. Hardly has faith in their ratings anymore, yet they are continuing to throw their weight around the country and the world as we speak, threatening nations, states and companies with their awful rating power.
As we can see from the token attempts at reforming the raters who ratified the greatest rip-off in history, not much is likely to be accomplished other than a little tweaking of business as usual. Big business owns the government of the United States. Its regulatory agencies, in turn, are naturally in bed with the business they regulate, outsource certain regulatory functions via certain licensing arrangements, and there is the nub of the unjust enrichment. The United States Congress has given the Securities and Exchange Commission the franchise for franchising credit rating agencies, whose business is guaranteed by the fact that numerous laws require investments to be favorably rated by them prior to issuance. Thus are the ratings “embedded” in the law, and have the weight of the government behind them. Moody’s, Standard and Poor’s, and Fitch have most of the spoils of this arrangement hence are referred to as an oligopoly.
The laws and regulations make it very difficult to hold the licensed raters responsible for anything but blatant fraud, and even then the judiciary has made that very difficult to prove whenever the raters are accused. Whenever suits are brought for breach of contract, negligence, misrepresentation and the like, the credit rating agencies plead their favorite defense, that their ratings are only published opinions or are protected by the Second Amendment, which prohibits the abridgement of freedom of speech or the press. The judiciary goes along with the one-sided, fallacious argument hence is complicit in fostering an attitude that the credit rating agencies could literally say anything they wanted to in the form of a rating and not be held liable for mistakes and lies. So much for an independent judiciary, whose lawyers make and enforce the very laws that legalize the iniquities of their rich and powerful clientele.
The gate-keeping credit rating agencies are now solely to blame for the economic fiasco. But they did ratify the underlying recklessness, misrepresentations, negligence and fraud with their fraudulent advertisements, and did so for an enormous profit, hence they exemplify the wrongdoing. Wherefore they should be stripped of their officious rating power and their specious constitutional protection. To allow them to continue with business-as-usual would be to pave the road to Hell with “investment grade” ratings.