Screw Moody's - Threatening to downgrade U.S credit standing

[autorank]

Lets see. Moody's rates debt for a fee. Who paid Moody's to come out against the United States. And who will benefit on the trading on that debt?

btw, Moody's was just indicted for fraud by the Connecticut Attorney General: Blumenthal Sues: Moody's, Standard & Poor's Accused Of Misleading Investors. He said, "They lied."

The crooks need to be shut down now before the drag us even further down.

Moody’s Says U.S. Debt Could Test Triple-A Rating
http://www.nytimes.com/2010/03/16/business/global/16rating.html
By DAVID JOLLY and CATHERINE RAMPELL

The gold-plated credit rating of the United States — an article of faith across America and, indeed, around the world — may be at risk in coming years as the nation copes with its growing debts.

That sobering assessment, issued Monday by Moody’s Investors Service, provided a reminder that even Aaa-rated United States Treasury bonds, supposedly the safest of safe investments, could be downgraded one day if Washington failed to manage the federal debt.

Moody’s said the United States and other major Western nations, particularly Britain, have moved “substantially” closer to losing their gilt-edged ratings. The ratings are “stable,” but “their ‘distance-to-downgrade’ has in all cases substantially diminished,” the credit ratings agency said.

A downgrade would affect more than American pride. The bigger risk would be to the country’s ability to keep borrowing money on extremely favorable terms, and therefore to keep spending more money than it takes in from tax revenue.

[Larkspur]

1. I bet ya a credit default swap that it was Wall Street that hired Moody

to publicly threaten the US's credit rating.

[autorank]

5. Somebody did.

They're not a non profit;)

The whole idea of Wall Street having a credit default swap on the sovereign debt of the
United States, when they're responsible for a huge part of the debt, is utterly pathetic.

Nobody to speak for us on this, however. It just keeps rolling down hill and who are we
to "begrudge" the huge rip off for personal gain of 10,000 investment bankers.

How about the 300,000,000 other citizens?

[anigbrowl]

18. No, not necessarily

They don't just re-rate when someone pays them to do so. They recalculate bond ratings and so on every time there is a new issue, which takes place on a regular basis. I am not a big fan of the way teh ratings agencies function, but on the other hand you don't seem to understand it at all. Over the long term, yes there is is indeed a risk that that the US bond rating could go from AAA to AAA- or even AA. The national debt increased significantly under the bush administration, which affects our long-term fiscal outlook, just as it does for every other country.

It's not just Moodys, pretty much anyone who keeps an eye on bond prices and treasury data (ie anyone with a serious interest in the economy and a clue) is worried about the long-term debt load of the US and many other developed countries. If they were talking out of their ass then there would be plenty of economists standing up to contest the claim, but the fact is that economic fundamentals are pretty challenging right now. This is no more anti-US than ciriticism of the bush administration on DU was. Ultimately, these ratings are based on the data the government itself puts out.

[autorank]

35. Connecticut AG on Moody's shoddy policieis and practices

"Both Moody’s and S&P have secretly defied their public promises and legal duty to provide independent and objective ratings," Blumenthal said.

This was not always the case. At one time, Moody’s and S&P refused payments from -- or even to meet with -- issuers of a security it rated. The companies’ business models have increasingly shifted, however, so that a vast majority of their fees are now paid by issuers.

As one of Moody’s former vice presidents publicly noted, "Starting in 2000 there was a systematic and aggressive strategy to replace a culture that was very conservative, an accuracy and quality oriented culture, a getting the rating right kind of culture, with a culture that was supposed to be business friendly but was consistently less likely to assign a rating that was tougher than our competitors." Richard Blumenthal, Attorney Genera, Connecticut, March 10

[CoffeeCat]

15. How would Wall Street ultimately benefit...

...from Moody's downgrading the US's credit rating?

I'm not clear what the exact effect(s) this downgrade would have on
Wall Street or the US economy.

If anyone cares to explain it to us out in the cheap seats, I would
love to understand how a credit downgrade would affect our economy
and how Wall Street might benefit.

Thanks so much. Just trying to keep up and understand this.

[anigbrowl]

19. It wouldn't

If ratings went down basically the government would have to offer a higher rate of interest on bonds (which is what's happening to Greece right now, because they were overspedning and then fudging the national accounts until quite recently). A higher rate of interest means higher payments to bondholders (to compensate for the increased risk), and thus more of your taxes go towards debt service.

Now you might think that bondholders would want to crank the interest rates as high as possible in order to collect more interest, but doing so would mean that they were taking a greater risk with their investors' money and would in turn have to pay more interest themselves and hold more insurance against the risk of default. It would be easier and cheaper to just avoid the risk altogether and buy the bonds of some country with a healthy economy, such as Germany. Financial institutions are generally required to hold minimum amounts of highly-rated bonds in order to provide a sufficient degree of security for investors.

But if the rating were artificially lowered and not truly reflective of economic reality, the increased cost of bond service could be offset by allowing the currency to depreciate by the simple expedient of increasing the money supply, thus inflating away the debt. There's a distinct possibility that this might happen anyway to a limited degree, in order to smooth out the cost of debt management at relatively little real expense. that would )or perhaps will) lower the value of the dollar relative to other countries' currencies, which would reduce the real value of Wall Street profits.

Probably rather more than you wanted to know, and you shouldn't construe this as financial advice or an economics lesson. The short answer is that a credit downgrade would drive up taxes or necessitate a reduction in spending, but the benefits would go more towards other countries than towards Wall Street (please, no conspiracy theories about it being part of some secret attack on the dollar...politicians like to drag that one out when they're in trouble but reality is that there are tens of thousands of economists in the world, and it wouldn't be possible to fool all of them at once.

[JackRiddler]

22. Leverages the politics the way they like it.

& Means higher interest on government bonds. Governments go further into the hole, pay more, are more pliable.

Also means the volume will go up by ten times on the noise machine calling for budget cuts (except "defense"), reductions in "entitlements," reductions in pensions, firing of civil servants and teachers, keeping taxes low, but continuing to subsidize corporations, etc. etc.

I don't know and I don't think that "Wall Street" got Moody's to make these latest noises about downgrading. They are effectively the "objective" voice of capital, or have successfully sold themselves as such. Capitalism has its own logic easy enough for them to divine. It's a class interest they represent.

[DJ13]

2. A rating cut is likely a way to set the stage for forced austerity programs

The elites still want to end as many social programs as they can get away with.

[autorank]

6. They're like robot zombies

They just keep doing the same rotten moves.

Did you know Wall Street is barred from doing bonds for sovereign debt in the European Union?

That's amazing. Moody's is a big part of the scam and they're doing someone's bidding right
now.

[Dreamer Tatum]

3. So, the US is fucked, the economy is in the toilet, yadda yadda, but

...no one can point that out?

I see. :crazy:

[autorank]

7. The debt is largely due to the idiocy on Wall Street and

their political influence. The bailouts, the $23.7 trillion in credit extended to Wall Street by
the Fed, the "never tax the rich" theme since Reagan that's killed us financially and racked up
the deficit...where does this come from? One guess. Now isn't it ironic that indicted for fraud
Moody's is out there downgrading the debt that it's customers, the investment banks, created?

[Dreamer Tatum]

11. debt is debt is debt is debt

And this economy's ability to repay it is what's in question.

Not sure why anyone cares, anyway. What, you get some nationalist pride out of the US credit rating?

[autorank]

12. You get some pride in more Wall Street rip offs?

The debt rating is an instrument for income in the new world of CDS.

This article will have an effect and a change in the actually rating will have an effect
on the credit default swaps on our debt. Look at Greece, California, etc. etc.

[Dreamer Tatum]

14. What a depressing place DU has become

Yes, anyone pointing out that our national debt will be difficult to service is a Wall Street lover. Just like anyone who doesn't genuflect to people who SWEAR their Toyota wouldn't stop are corporate shills.

Man. Sad.

[Common Sense Party]

26. Economic ignorance abounds

And this ain't exactly a "reality-based community" here

[autorank]

34. According to the Attorney General of Connecticut - Moody's & others

" These credit rating agencies gave the best ratings money could buy -- catering to their powerful investment bank clients, rather than objectively rating risky bonds," Blumenthal said. "Countless investors and others -- including individuals, banks, mutual funds, insurance companies, hedge funds and pension funds -- were misled into believing that these credit ratings were independent and objective, and lost money on investments they might have avoided if told the truth."

Moody’s and S&P violated public trust -- resulting in many investors purchasing securities that contained far more risk than anticipated and that have ultimately proven to be nearly worthless.

"The results have been catastrophic -- crippling the entire economy. Today’s lawsuit seeks an order stopping Moody’s and S&P from deceiving consumers, as well as civil penalties and disgorgement of ill-gotten profits."

Office of the Attorney General, Connecticut

[anigbrowl]

20. You're talking crap

Greece has not been getting ripped off the by the banks. They have been ripping everyone else off by cooking the books on their national accounts. Ireland has had problems from overspending, which is why they're imposing swingeing budget cuts right now (after several years of poor fiscal controls). California's finances are in the toilet not because of Wall street but because the state GOP wont' sanction any increase in revenue and because the Federal government has been taking more tax from the state than it gives back in federal spending for years, such that California has been subsidizing other poorer states for a long time.

The debt rating isn't just some made-up number. It's based on a state's own data about debt load, revenue, unfunded future liabilities and so on. You have some financial knowledge but not nearly as much as you think, and you're running round scaring people without proper evidence to back up your views. this does not mean that I am giving ratings agencies a free pass, but your talk of them tailoring their results to the highest bidder is just absurd.

[autorank]

31. Not at all

The CDS market is a time bomb waiting to go off:

Here's a recent comment:

"The massive $62 trillion worth of credit default swaps ($62 trillion in the Unites States alone, according to the International Swaps and Derivatives Association) may be on the verge of a collapse and this would make the subprime issues and asset backed securities associated with subprime look like a picnic. We have warned for some years regarding the threat posed by the humongous unregulated derivatives market and Buffet's “financial weapons of mass destruction” phrase seems more apposite by the day. " http://www.marketoracle.co.uk/Article6763.html

And an earlier one in Time Magazines coverage a few months ago:

"The CDS market exploded over the past decade to more than $45 trillion in mid-2007, according to the International Swaps and Derivatives Association. This is roughly twice the size of the U.S. stock market (which is valued at about $22 trillion and falling) and far exceeds the $7.1 trillion mortgage market and $4.4 trillion U.S. treasuries market, notes Harvey Miller, senior partner at Weil, Gotshal & Manges. "It could be another — I hate to use the expression — nail in the coffin," said Miller, when referring to how this troubled CDS market could impact the country's credit crisis." Snip

"Still, most agree the potential repercussions are far-reaching. "It's the ripple effects, the domino effects" that are worrisome, said Pincus. "I think it's one of the next shoes to fall" in the credit crisis. Miller said the subprime debacle, rising unemployment, record-high oil prices, and now CDS market troubles "have all the makings of the perfect storm.... There are some economists who say this could be another 1929 — but I don't believe it," he said. "We have a lot of safeguards built into the system that did not exist in 1929 and 1930." None of them, though, are directly targeted at CDS. On Wall Street, innovators are always ahead of regulators. And that can sometimes have a very steep price."

Read more: http://www.time.com/time/business/article/0,8599,1723152,00.html#ixzz0iKREh4t8

Credit Default Swaps are not regulated and there's no way to track the trading.

They're the quicksand beneath the foundation of the economy.

The behavior of Wall Street, which thrives on these instruments has been so bad that the European Union BANNED Wall Street firms from participating in the bond market for member sovereign debt. Imagine that, banned form doing business. What does that imply?

"European countries are blocking Wall Street banks from lucrative deals to sell government debt worth hundreds of billions of euros in retaliation for their role in the credit crunch."
http://www.guardian.co.uk/business/2010/mar/08/us-banks-european-bond-trading

In addition, the EU is considering banning CDS on sovereign debt and will act to tightly regulate it very soon. Why? Because it is an unregulated, over valued, moribund market that no one can track with the detail required to even begin to understand it.

"The European commission announced moves today to shore up the euro and ward off market pressure on Greece by considering a ban on complex derivatives allegedly being used to undermine the single currency." http://www.guardian.co.uk/business/2010/mar/09/greece-euro-barroso-papandreou-cds

Newsweek called it http://www.newsweek.com/id/233645">Wall Street's Euro Scams.

Yet Moody's was right there, arm in arm with Wall Street, the whole ride. Then there's the problem with Connecticut's Attorney General indicting Moody's ... and the A.G.'s comment about their cooperation with the investigation - "They lied."

[JackRiddler]

24. Everyone can point it out, and does.

But when Moody's does it, their words cause interest rates to rise interest and austerity programs to be forced.

Point is, Moody's didn't tell the truth about mortgage securities. This caused a disaster. They haven't been punished. They were rewarded! The disaster raised the debt, because the government appeased the banker-terrorists with the "bailouts." Now the liars at Moody's want to turn around and solemnly tells the truth about US debt? Fuck them. They should have ceased existing two years ago, along with the rest of the organized crime cartel on Wall Street. They can talk about how lousy the US economy is (it is!) from their cells in federal prison, where they should have been all along.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x7922092

[autorank]

30. There's no success like failure, you're right.

Moody's was asleep at the switch but do we get an apology or we'll try harder next time?

We're so mired on phony numbers, it's ridiculous for Moody's or anyone else to even begin to judge
the the credit worthiness of any sovereign entity. We're all a mess.

When the system grinds to a halt with the prospects for the future pointing toward endless crises,
it's time to admit failure and reboot. A good way to start would be to confiscate the $150 billion
worth of bonuses that the 10,000 employees of investment banking firms took out of the economy, have
a conference to cancel out the absurd CDS agreements, ban that gambling, and devote just a portion
of the $24 trillion government generated/backed credit promised the banks to real projects like
infrastructure, health, R&D on alternative fuels/energy, etc. We sacrifice progress and prosperity
in order to prop up the banks and run a jobs program for failed financial executives.

[JackRiddler]

39. Let the record show that Wall Street went bankrupt before the United States.

And they were "bailed out" - meaning the Treasury was privatized on their behalf. This contributed to the likely bankruptcy of the United States.

Moody's lied to hide the first bankruptcy - that of Wall Street - until it became obvious.

When they "tell the truth" about the prospective second bankruptcy, which their lie helped to cause, they are only heaping an even greater burden on their savior United States, which will as a result of the downgrade be forced to pay even more in interest to the predators on Wall Street.

[autorank]

43. Your analysis on this is just brilliant as your threat!

[Hello_Kitty]

4. The upside is we won't be able to buy as much Chinese crap. eom

[autorank]

8. Yep, then they'll have a depression

and they won't buy our debt bonds. It all fits nicely.

[Odin2005]

9. This is how they will force Austerity Measures on us.

"We have no other choice..." :puke:

[autorank]

13. "Austerity" - the next big thing

That one is sneaking in just like "Homeland." It's good that the Europeans finally got fed up
with Wall Street's crap. Banned them on bonds and threatening to do so on CDS on sovereign debt.

That's a big market to lose.

[anigbrowl]

21. They have not 'banned Wall Street'

you are just full of bullshit today. If they had banned them, how come Morgan Stanley is still handling eurozone sovereign debt? They're preferring homegrown banks in a form of simple financial protectionism. I don't particularly blame them,. but it won't last. Euro banks don't handle that much US debt either, but it's not because they're 'banned' from doing so.

There has been no ban. Did. Not. Happen. What did happen was a bunch of people over-literally interpreting a headline in one Guardian story (http://www.guardian.co.uk/business/2010/mar/08/us-banks-european-bond-trading) and attributing greater importance to it than it deserves - and if you actually read the story it makes perfectly clear that no such ban has occurred. European countries are just showing greater favor to their domestic investment banks for now.

[autorank]

33. Watch your tone

or I'll just put you on ignore.

Here are two sources that share my interpretation of the Guardian article.

Seeking Alpha
http://seekingalpha.com/article/192818-wall-street-barred-from-european-bond-sales-due-to-credit-crisis

CS Monitor
http://www.csmonitor.com/Money/The-Daily-Reckoning/2010/0311/Wall-Street-snubbed-in-European-sovereign-bond-sales

It looks like US banks are losing the opportunity to earn fees on the roughly $500 billion in planned European debt offerings this year. It probably shouldn’t come as a big surprise, given the less than savory details that emerged regarding Goldman’s relationship with Greece, and the series of black eyes the euro currency has been enduring as a result of sovereign debt-related instability.

[Bozita]

10. Moody's is good at ratings? ... And why ain't those motherfuckers rotting in prisons, real prisons?

AAA my ass! These thieves are part and parcel of the largest theft/con in the history of the planet.

Fill a bucket with real horseshit. Moody's will tell you it's filled with the finest beef tenderloins and is certain to please your most persnickety guests.

Real fucking prisons, the ones with the murderers, rapists, and weightlifting crazies.

Let's hear it for Moody's!

[upi402]

16. uh oh

Dodd's Bill is not even half-measures. Epic fail cometh, it's sneaked out already. Buy gold if you don't have land.

[nadinbrzezinski]

17. China has been playing a few games

add to that a few ahem raiders on WS....

Need I say more?

[Dr.Phool]

23. Will BofA jack up their interest rate to 30%?

[JackRiddler]

25. Related Thread: Moody's Prepares New Terror Attack on US and World

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x7922092

[Incitatus]

27. You can't spend more than you make every year without it coming back to bite you in the ass?

:shrug:

[Truth2Tell]

28. How do you know they're not right?

Yes, Moody's ratings are a sham. But usually their MO is to over-rate debt. My read is that US debt is a suckers bet considering our current decline. Maybe Moody's has been helping maintain the facade with their "gilt-edged" rating all along. And now the elephants in the room have become so bloated that they at least have to acknoledge them to maintain any shred of their phony credibility.

After all, they ultimately serve the same masters as our governing elite.

:shrug:

[autorank]

32. When money is worthless, how do you estimate debt?

Can Moody's rate debt better than a chimp flipping coins. I'd say yes. Are they as honest as
that chimp? Probably not even close. That's the problem.

Now they're messing around in the U.S. sovereign debt. These damn derivatives were illegal for
almost a century until 2000 when the "morans" let them back in the door.

Ultimately, they can't be right unless they're honest about their motivations and unless they
admit that their ratings feed a market that's unregulated and opaque.

We need to just wake up and say that this current nepotistic oligarchy doesn't work anymore.
It needs to be rebooted and focused on real products and services. Not a bad idea.

As for Moody's, see this. It's enlightening.

Office of the Attorney General, Connecticut

"Moody’s and S&P modified rating methodologies to make more money: In short, in direct contrast to their public representations, and unbeknownst to investors and other market participants, Moody’s and S&P’s rating methodologies were directly influenced by a desire to please their clients and enhance their own revenue. Assessing actual credit risk was of secondary importance to revenue goals and winning new business."

[Truth2Tell]

37. I fully agree that they are dishonest.

I just believe that they generally falsely prop up US (and other) debt, not falsely diminish it. They are paid by the same interests who benefit from overvaluing US debt, so why would they under-rate it?

What are you suggesting is their motivation? The Chinese got to them? Someone else?

:shrug:

[autorank]

40. I'm a Martin Act kind of guy;)

No motivation necessary under that no nonsense depression era law in NY State (Cuomo is using it
against BofA). But I'm avoiding your question. I would have to defer to the law suit by the
Connecticut A.G. He's had a team working on this and his indictment is quite something.

This is from his press release. I have not had a chance to review the brief. Can't wait. But
this is fairly clear:

"Moody’s and S&P knowingly catered to the demands of investment banks and other large issuers of
structured finance securities in order to increase their own revenues. As a result, many
structured finance securities that contained a great deal of credit risk undeservedly received
Moody’s and S&P’s highest ratings, Blumenthal alleges.Moody’s and S&P knowingly catered to the
demands of investment banks and other large issuers of structured finance securities in order to
increase their own revenues. As a result, many structured finance securities that contained
a great deal of credit risk undeservedly received Moody’s and S&P’s highest ratings, Blumenthal
alleges." http://www.ct.gov/ag/cwp/view.asp?A=2341&Q=456804

It's that "do ray me!" They wanted more of it and performing the role of financial courtesan was
the quickest route. They sold their good name cheap. Blumenthal, the A.G., said that this was
not always so but they'd sold out.

As the rating agency for a lot of things financial, Moody's was "the foundation" (isn't that
the translation for al Qaeda) of the financial collapse, Blumenthal charges. Big stuff.

The BofA case is tight, locked down, no motivation or intent required. If this Moody's case is
the same quality as Cuomo's, then we're talking about two institutions taking a huge fall. I
truly hope both cases go to trial.

[jgraz]

29. Next step: Latin-America-style austerity "reforms"

Expect drastic cuts in social spending, hikes in "fees" on the poor and middle class and absolutely no change in upper-class tax rates or defense spending.

[autorank]

42. I think that was the plan all along

To wit, little Timmy and Summers.

Ironically, that would be Latin America of the 80's and it surely applies. It's an upside
down world.

I agree!

[NickB79]

45. The only question is: does the American public have balls as big as the Greeks?

Will we be in the streets by the millions, protesting and yelling, threatening to drag the bastards who caused this mess through the streets? Or will we just bend over and take it again?

[Warren Stupidity]

36. Where is my gun? I want to help shoot the messenger!

Moody's may be a criminal cartel and everything, but it also might be the case that the serious flood of debt we have generated is unsustainable. Both of these may be true.

[Political Heretic]

38. It's a shot across policy makers bow - don't pass policy we don't like, or else.

[MadHound]

41. Why do you want to shoot the messenger?

You can't rack up trillions in debt, have a declining economy, no regulatory reform and expect to be given good credit.

[maryf]

44. bump

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