Moody’s, S&P, and Fitch are not even close to being independent observers of the credit markets!
They make money rating all kinds of financial instruments ranging from the Toxic Assets we bailed out with TARP to the securities sold by the federal government to finance our debt! They make money every time they rate the financing instruments of private and public entities so they have a vested interest to make sure these entities look good to the public so there will be more business down the road!
So why are you listening to these agencies when they say the not raising the Debt Limit will cause the US Credit Rating to be downgraded?
Remember the Sub-Prime Mortgage Crash of 2008? Guess what the “Big Three” Ratings agencies were telling the world. Yes, you are right. They were saying that Freddie Mac and Fannie Mae were no problem at all and the mortgage industry, supported by these to Government Sponsored Enterprises was all hunky-dory! How could this be? Well, these fine credit rating agencies also have another side business that was an absolute, direct, conflict of interest to supplying market ratings for companies like Freddie, Fannie, Countrywide and others involved in the Sub-Prime fiasco. These rating agencies are contracted by Freddie, Fannie, Countrywide and others to grade their “Collateralized Debt Obligations, CDOs”. This was an enormously profitable business for the credit agencies.
Basically, this is the same as putting the Fox in charge of the Hen House. But, in this case, the hen-house was worth billions of dollars. The credit rating agencies would do everything they could to keep their clients happy, including Freddie, Fannie and Countrywide, including over-rating those companies credit worthiness! In 2004, Moody’s generated $553M grading CDOs and this was increased to $900M in 2006! This was big business and these agencies got in bed with the devil to insure continuation of the real estate bubble. They were still giving Fannie Mae glowing ratings just days before the FHFA put Fannie Mae and Freddie Mac in conservatorship in September, 2008.
The criteria to test the credit worthiness of any nation is not the debt ceiling but that nation’s ability to pay off its credit obligations relating to principal and interest payments on its debts. Today, those payments amount to anywhere from 6-12% of our total monthly revenues taken in. So, there is ample money to make sure we do not default on our debt in the near term. The real criteria should have been the GDP to National Debt ratio. As the national debt increases as a percent of the GDP, there is less and less ability in the private sector to grow as the government has to keep increasing its revenues, TAXES, to cover the debt payments. The three credit rating agencies do not care about that. They NEED the Federal Government to raise its debt ceiling so the credit agencies can continue to get paid to assess the bond offerings! That is where their money is! They don’t care about you. They are in bed with Obama, Geithner and Bernanke to make sure we acquiesce and keep them all in cash! The Debt Ceiling is only important if we can get our debt under control first.
If the government was worried about the Debt Ceiling, why did they spend $3.5 Trillion Dollars in each of the last two years and are poised to spend the same this year thus driving us to the brink of breaching the current debt limit of over $14.5 Trillion Dollars!!!
They got us here, Do you Trust them to Fix their own Addiction?
So, focus on the debt and spending reductions. That is where the real credit worthiness will be improved. We have to take some of the “purse power” away from Congress and the President. Support the CUT-CAP-BALANCE efforts underway to reign in this out of control government. Go to this link to join the effort to take back our country and get it out of the strangle-hold of Wall Street, the Federal Reserve, Big banks, and these credit rating agencies!http://www.cutcapandbalanceact.com/
Take the pledge, it is free!
- Cut– Substantial cuts in spending that will reduce the deficit next year and thereafter.
- Cap– Enforceable spending caps that will put federal spending on a path to a balanced budget.
- Balance – Congressional passage of a Balanced Budget Amendment to the U.S. Constitution — but only if it includes both a spending limitation and a super-majority for raising taxes, in addition to balancing revenues and expenses.
Don’t wait until it is too late!