What: "Why S&P Has No Business Downgrading the U.S."
When: August 5, 2011
Former Secretary of Labor Robert Reich reiterates his inquiry of Standard & Poor's:
S&P's intrusion into American politics is also ironic because, as I pointed out recently, much of our current debt is directly or indirectly due to S&P's failures (along with the failures of the two other major credit-rating agencies — Fitch and Moody's) to do their jobs before the financial meltdown. Until the eve of the collapse S&P gave triple-A ratings to some of the Street's riskiest packages of mortgage-backed securities and collateralized debt obligations.
Had S&P done its job and warned investors how much risk Wall Street was taking on, the housing and debt bubbles wouldn't have become so large – and their bursts wouldn't have brought down much of the economy. You and I and other taxpayers wouldn't have had to bail out Wall Street; millions of Americans would now be working now instead of collecting unemployment insurance; the government wouldn't have had to inject the economy with a massive stimulus to save millions of other jobs; and far more tax revenue would now be pouring into the Treasury from individuals and businesses doing better than they are now.
In other words, had Standard & Poor's done its job over the last decade, today's budget deficit would be far smaller and the nation's future debt wouldn't look so menacing.
The problem, of course, being that while many would suggest Reich is simply pressing sour grapes, the question of political implications does seem valid.
Rachel Maddow pushed the question on Meet the Press:
MR. CASTELLANOS: I think riding, you know, it's like being a newspaper editor, riding out of the hills down to the battlefield after the battle's over and shooting the wounded. I don't think that's particularly productive. But I think something Mr. Greenspan says is important and that is that this is not going to be without pain. There's a reason alcohol, drugs, and promiscuous government spending are all addictive. They feel good at first. When you stop doing them, it's going to feel less good.
MR. GREGORY: Right.
MR. CASTELLANOS: Republicans out there politically are saying, "Take the pain now. Don't pass it on to the next generation." That's why they're being so firm.
MR. GREGORY: I suspect you disagree with it, that that's their view.
MS. MADDOW: To the extent that we are taking the S&P downgrade as a serious thing, that we believe that S&P has the credibility to have done this, and this actually does levy a blow against the U.S. economic credibility. I mean, honestly, we should talk about the fact that during the financial crisis, S&P was handing out AAA ratings to any pile of junk tall enough to reach the doorbell and ask. So they do not have the most credibility on this. But if we are going to take them seriously, let's take them on their word about why they did this. They said they did this because of brinksmanship over the debt ceiling. They did not say they did this because there's too much government spending.
The political question is, of course, complicated to the point of stupidity, but the question remains: Why now?
No comments:
Post a Comment