Standard & Poor's. There just ain't enough rage to go around

[redandguilty]

http://finance.yahoo.com/news/the-last-mystery-of-the-financial-crisis-154447818.html?page=all

Thanks to a mountain of evidence gathered for a pair of major lawsuits by the San Diego-based law firm Robbins Geller Rudman & Dowd, documents that for the most part have never been seen by the general public, we now know that the nation's two top ratings companies, Moody's and S&P, have for many years been shameless tools for the banks, willing to give just about anything a high rating in exchange for cash.



"Lord help our [expletive] scam . . . this has to be the stupidest place I have worked at,"

 

[mhughes0021]

Bye bye dollar...nice knowing you

 

[KAWDUP]

Bye bye dollar...nice knowing you

So you think this is the reason the dollar will go down the tube? Not the complete irresponsibilty of our leaders or our continued crushing debt situation?

It is a bad and scandalous series of reports, to be sure, but it is barely even a secondary reason the dollar may fail let alone a primary one. Did it cause the crash - yep, likely it is a major factor.

The dollar is down, but did it completely fail due to the crash? Certainly not yet, and this scandal will do very little to cause the dollar's demise.

 

[Michchamp]

So you think this is the reason the dollar will go down the tube? Not the complete irresponsibilty of our leaders or our continued crushing debt situation?

It is a bad and scandalous series of reports, to be sure, but it is barely even a secondary reason the dollar may fail let alone a primary one. Did it cause the crash - yep, likely it is a major factor.

The dollar is down, but did it completely fail due to the crash? Certainly not yet, and this scandal will do very little to cause the dollar's demise.

where are you getting your facts about the debt situation being "crushing." whatever blog tsmith visited for his "addicted to spending" rants?

by other estimates, the debt situation was never as bad as claimed; and besides that, it seemed like most conservative were using the higher payouts from welfare programs that kicked in after the economy tanked in 2008 (as they were designed to do when they were put in place decades ago) and fallaciously describing these as spending increases from Obama, while also projecting they would continue out at that rate, which was highly unlikely... as they would decrease over time as the economy recovered.

I read a more recent article that stated that with the massive budget cuts to social programs and the tax increases earlier this year, the federal deficit is really nothing to get excited about right now.

Anyways, the reports of S&P and Moody's misconduct are not news to me - or anyone else who has been paying attention - but they may be to people who haven't been, or those who mistakenly or intentionally claimed the real estate crash was caused by "the government" or "minorities borrowing too much."

in the latter case, the people making those claims were either the financial industry & its PR flacks trying to deflect the blame from their massive fraudulent behavior and forestall any attempts to improve regulation of the industry and block criminal indictments for those responsible (which they were successful at doing)... or idiots who believed the deflections.

 

[redandguilty]

by other estimates, the debt situation was never as bad as claimed

I don't know what estimates you're talking about of course, but it's as bad as it's been since WWII. Freakish deficit spike in Bush's last year and Obama's 1st, but it's been heading in the right direction since then. If we keep improving at this rate, we'll hit 80's levels of deficit in 3 more year. Debt's still heading in the wrong direction, and it's also freakishly high, but we're making progress about as fast as we can I think.

http://www.wolframalpha.com/input/?i=us+deficit/us+gdp

http://www.wolframalpha.com/input/?i=us+debt/us+gdp

Anyways, the reports of S&P and Moody's misconduct are not news to me - or anyone else who has been paying attention

Knew they were way off and taking the wrong people's word for it/letting the foxes guard the hen house. Hadn't heard ratings described as 'for sale' before.

 

[redandguilty]

Regarding debt, in terms of months of GDP, Reagan took us from under 3 months to 6 months over his terms. Since 2008, we've gone from 8 months to a little over a year. So we're spending like we've got 2 Reagans fighting 2 Cold Wars.

 

[Michchamp]

Regarding debt, in terms of months of GDP, Reagan took us from under 3 months to 6 months over his terms. Since 2008, we've gone from 8 months to a little over a year. So we're spending like we've got 2 Reagans fighting 2 Cold Wars.

the "debt spike" you spoke of in your other post was mainly related to welfare payments kicking in as more people were laid off their jobs and went on the dole. this wasn't a permanent spending increase, or intended to be.

the "stimulus" was a temporary provision, and despite the howls of fear and loathing from Republicans, most of it was in the form of temporary tax breaks. little was actually in the form of cash handed out for projects.

it was widely seen as a bad thing by Republicans (because everything Obama does is bad to them), and a bad thing by economists (because it was watered down to the point of ineffectiveness and would only further serve to bolster the GOP's position, while doing nothing to solve the depressed economy).

regardless, this wasn't discretionary spending that was going through the roof (like it did when Bush took office and rammed through all the insane Homeland Security pork spending).

 

[Michchamp]

...


... Hadn't heard ratings described as 'for sale' before.

this has all been adequately documented at this point. they were the key part of the fraud (see part 3)

1. the mortgage originators (e.g. Countrywide Financial) gave out mortgages to anyone with a pulse (and in a significant number of cases, even forged documents so unqualified buyers would qualify), and didn't perform any due diligence, such as verifying employment or income because they knew they weren't responsible for collecting the mortgage payments... that was a different party's responsibility, and therefore didn't bear the risk of bad underwriting practices, yet were allowed to keep all the underwriting fees!

2. then the banks (e.g. Goldman) took all the mortgages and bundled them into mortgage securities (MBEs), which are like bonds - the holder of the MBE collects all the mortgages payments from all the mortgages in the MBE, and resold them to third parties, typically pension funds, but also other banks (like Bear Stearns).

3. they were able to do this only because the rating agencies (e.g. Standard and Poors) rated all these MBEs AAA regardless of whether they were or not (and they were not) as pension funds were required by law to only buy AAA-rated securities.

4. a side issue that exacerbated this, AIG sold credit default swaps (CDS) essentially insurance policies that would pay out when the MBEs went broke (which occurred when enough people stopped paying their mortgages). AIG sold lots and lots of CDSs, without adequately providing reserves to pay them in the event the had to, giving a lot of the holders a false sense of security. it would be like Geico writing lots of auto-insurance policies for extremely risky drivers, without keeping cash reserves to pay on the claims.

all these problems were unnoticeable so long as people kept paying their mortgages. but they couldn't, either through job loss in a slowing economy, or because the adjustable rate mortgages they were given suddenly shot up in cost as the teaser rates the mortgage originators sold to them (remember from part 1 they played fast and loose with the issuing of these things).

when enough people started defaulting on their mortgages, all these obligations came due at once, and would've bankrupted the people holding MBEs and AIG, but the government stepped in to shore things up.

there are a lot of lawsuits flowing between these parties, but sadly, no criminal prosecutions for any of the people responsible despite all the outright evidence of fraud that has been presented.

 

[redandguilty]

the "debt spike" you spoke of

I didn't say "debt spike", I said "freakish deficit spike". It's the biggest 2-year spike since WWII after adjusting for GDP growth (if you don't adjust for GDP it's probably the biggest spike ever.)

F'in stimulus. Bigger than the sum total budget of NASA for it's entire existence. Not that we didn't need stimulus, but more of it needed to go to infrastructure repair.

 

[Michchamp]

and the banks were allowed to do this because:

1.) the Democrats take money from the banks (see, e.g. the campaign donations to Barack Obama and Chuck Schumer) in exchange for doing nothing, and

2.) the Republicans believe they should do nothing

 

[redandguilty]

this has all been adequately documented at this point. they were the key part of the fraud (see part 3)

I can chalk some of this up to Taibbi being sensationalist, but the shift that is the focus of the article and the part your narrative misses is how the rating agencies got paid. They went from being paid by buyers of the financial instruments they rated to being paid by the people that sell the financial instruments they rated. Ratings fees doubled from '02 to '07 and they have evidence that the problem was well understood.

The eventual president of Moody's, Brian Clarkson, actually copped to this awful truth in writing, in a 2004 internal e-mail. "To put it bluntly," he wrote, "the issuer could take its business elsewhere unless the rating agency provides a higher rating."

 

[Michchamp]

I can chalk some of this up to Taibbi being sensationalist, but the shift that is the focus of the article and the part your narrative misses is how the rating agencies got paid. They went from being paid by buyers of the financial instruments they rated to being paid by the people that sell the financial instruments they rated. Ratings fees doubled from '02 to '07 and they have evidence that the problem was well understood.

well, I thought it was implied that the rating agencies would be rubber-stamping this stuff in exchange for fees from the banks, not just because they liked to rubber stamp stuff.

but yeah, that email is one of many smoking guns related to this whole scandal.

he's actually written about this specific aspect of the crisis before, and the books I've read on the subject also covered it.

Warren Buffett owns a part or maybe all of one of the rating agencies, maybe SP or Moody's, and he went on the record and denied that they were biased. oops! all his credibility went up in smoke on that one.

 

[redandguilty]

well, I thought it was implied that the rating agencies would be rubber-stamping this stuff in exchange for fees from the banks, not just because they liked to rubber stamp stuff.

but yeah, that email is one of many smoking guns related to this whole scandal.

he's actually written about this specific aspect of the crisis before, and the books I've read on the subject also covered it.

Warren Buffett owns a part or maybe all of one of the rating agencies, maybe SP or Moody's, and he went on the record and denied that they were biased. oops! all his credibility went up in smoke on that one.

I thought the conflict developed more inadvertently. Since the buyers and sellers of these things are often one way or another controlled by the same people, the motivations got blurry. I didn't know who was doing the paying had actually switched from what makes sense.

 

[KAWDUP]

where are you getting your facts about the debt situation being "crushing." whatever blog tsmith visited for his "addicted to spending" rants?

by other estimates, the debt situation was never as bad as claimed; and besides that, it seemed like most conservative were using the higher payouts from welfare programs that kicked in after the economy tanked in 2008 (as they were designed to do when they were put in place decades ago) and fallaciously describing these as spending increases from Obama, while also projecting they would continue out at that rate, which was highly unlikely... as they would decrease over time as the economy recovered.

I read a more recent article that stated that with the massive budget cuts to social programs and the tax increases earlier this year, the federal deficit is really nothing to get excited about right now.

Anyways, the reports of S&P and Moody's misconduct are not news to me - or anyone else who has been paying attention - but they may be to people who haven't been, or those who mistakenly or intentionally claimed the real estate crash was caused by "the government" or "minorities borrowing too much."

in the latter case, the people making those claims were either the financial industry & its PR flacks trying to deflect the blame from their massive fraudulent behavior and forestall any attempts to improve regulation of the industry and block criminal indictments for those responsible (which they were successful at doing)... or idiots who believed the deflections.

Way to get the point. I used "crushing" debt, you can just blame Bush as you always do. The point is, our natianal debt is no joke, and is a big reason companies are still moving huge amounts of cash off-shore. You keep thinking the US debt would play less of a role in the dollar's demise than this scandal. Keep those blinders on.

BTW the dollar hasn't met its demise yet, another point you seem to ignore.

Your tactics in this thread remind me more of a tsmith post than anything I have posted.

Qickest way to get someone's ire is to compare them to someone you obviously despise. You learn that from your spouse? I find they are usually pretty good at that.

 

[Michchamp]

Way to get the point. I used "crushing" debt, you can just blame Bush as you always do. The point is, our natianal debt is no joke, and is a big reason companies are still moving huge amounts of cash off-shore. You keep thinking the US debt would play less of a role in the dollar's demise than this scandal. Keep those blinders on. ...

it is not a joke, neither is it a serious problem. certainly it could become one, but at this juncture, using debt as an basis for directing social policy, typically to further cut benefits that provide for a more equal society (i.e. at the expense of the poor and middle class) in order to cut taxes (i.e. to benefit the wealthy) is penny wise and pound foolish. we're basically setting the stage for massive inherited wealth and influence to dominate a society that was once the greatest example of a meritocracy and upwardly mobile society that has maybe ever existed.

and companies are moving cash offshore to avoid their federal tax obligations; they are cheating to get ahead. it has nothing to do with the debt. your statement isn't even logical, and an example of specious reasoning.

... Qickest way to get someone's ire is to compare them to someone you obviously despise. You learn that from your spouse? I find they are usually pretty good at that.

pardon moi, monsieur, but my wife knows better than to play such frivolous mind games on me.

I am sorry if your post reminded me of something tsmith would've written, but it's hardly too far off the mark.

 

[Michchamp]

why are we talking about debt anyway? the issue here is that the conduct which gave rise to the real-estate collapse and near depression went unpunished, and hasn't been remedied going forward. Regulatory capture is still an issue; it was under Bush, and continues to be under Obama.

maybe the best and only logical public response to it was the Occupy Movement, and that was beaten into a bloody pulp of submission by the mainstream press and local police forces. the handful of members of the senate you could call public servants have advanced a few measures, but these haven't gotten too much traction.

 

[redandguilty]

why are we talking about debt anyway? the issue here is that the conduct which gave rise to the real-estate collapse and near depression went unpunished, and hasn't been remedied going forward. Regulatory capture is still an issue; it was under Bush, and continues to be under Obama.

maybe the best and only logical public response to it was the Occupy Movement, and that was beaten into a bloody pulp of submission by the mainstream press and local police forces. the handful of members of the senate you could call public servants have advanced a few measures, but these haven't gotten too much traction.

Good point. It's just hard to keep focused when there's so many targets for ire.

 

[KAWDUP]

it is not a joke, neither is it a serious problem. certainly it could become one, but at this juncture, using debt as an basis for directing social policy, typically to further cut benefits that provide for a more equal society (i.e. at the expense of the poor and middle class) in order to cut taxes (i.e. to benefit the wealthy) is penny wise and pound foolish. we're basically setting the stage for massive inherited wealth and influence to dominate a society that was once the greatest example of a meritocracy and upwardly mobile society that has maybe ever existed.

and companies are moving cash offshore to avoid their federal tax obligations; they are cheating to get ahead. it has nothing to do with the debt. your statement isn't even logical, and an example of specious reasoning.

pardon moi, monsieur, but my wife knows better than to play such frivolous mind games on me.

I am sorry if your post reminded me of something tsmith would've written, but it's hardly too far off the mark.

Companies have always moved money to other venues outside of the US to avoid taxes. Gee, I bet you think there hasn't been a huge increase in the amounts of money be moved lately? The number of reasons a company might do this range from National Health Care to uncertainty about the debt. Much of their latest concerns have to do with the strength of the dollar.

So are you saying that the strength of the dollar has nothing to do with the US National Debt?

You just aren't looking past your simplistic cause and effect. Calling someone's reasoning specious is just another way of saying you have no clue. Bully for you. I understand if this kind of stuff isn't your ken, but please don't project your deficiency on me.

. . . and calling your posting more like TSmith than mine isn't far off the mark either. Amazing how that works isn't it?

 

[KAWDUP]

why are we talking about debt anyway? the issue here is that the conduct which gave rise to the real-estate collapse and near depression went unpunished, and hasn't been remedied going forward. Regulatory capture is still an issue; it was under Bush, and continues to be under Obama.

maybe the best and only logical public response to it was the Occupy Movement, and that was beaten into a bloody pulp of submission by the mainstream press and local police forces. the handful of members of the senate you could call public servants have advanced a few measures, but these haven't gotten too much traction.

I agree, but saying bye bye to the dollar was the second post in this thread. May have been tounge and cheek, but I was responding directly to that. You were the one who responded to me. :*)

 

[Michchamp]

Companies have always moved money to other venues outside of the US to avoid taxes. Gee, I bet you think there hasn't been a huge increase in the amounts of money be moved lately? The number of reasons a company might do this range from National Health Care to uncertainty about the debt. Much of their latest concerns have to do with the strength of the dollar.

So are you saying that the strength of the dollar has nothing to do with the US National Debt?

...

the "strength of the dollar" is of course relative to other currencies; the relative value of the dollar has less to do with the US national debt, and more to do with the GNP & the amount of dollars in circulation.

if our debt were to increase significantly, such that the government couldn't make its debt obligations, what would really change would be that the interest rates on U.S. debt/Treasury notes would soar, and that never happened. it didn't even happen when S&P made their widely-reported "downgrade" of the U.S. credit rating... our borrowing costs stayed rock-bottom low. lowest in the world, I believe... which proves "the debt crisis" was more politics than actual economics.

Or am I misunderstanding everything? because this is how I learned it.

where did you get your B.A. in economics from? Ohio State or MSU?