Last Friday, the ratings agency Standard and Poors (S&P), in an odd episode of semi-sanity, decided to stand firm against the United States government and downgrade American debt from the golden AAA to AA+. The empire, being caught naked yet again, went into a fit of fury. President Obama dismissed the downgrade, not considering it an indictment of America’s economic condition. Rather, he said the downgrade occurred “because after witnessing a month of wrangling over raising the debt ceiling, they [S&P] doubted our political system’s ability to act.” Tax cheat Tim Geithner blasted S&P’s “really horrible judgment” and “lack of knowledge.” And former economic adviser to Obama, Christina Romer, spoke the truth saying that the US is “pretty darn fucked.”
While the state of America’s finances is certainly not worthy of even a AA+ credit rating, all of America was woken up. There is something terribly, terribly wrong with the USS America and if reforms are not instituted quickly, the ship will quickly sink to banana republic status. But despite the downgrade which could have been much, much worse, America’s politburo had a conniption. Why?
S&P dared to go where no credit rating agency has gone before. It defied the US government. Because of this audacity, the cozy relationship between S&P and D.C. all but vanished. Besides the toothless Levin and Coburn Senate report that effectively resulted in a matriarchal chastising of Goldman Sachs and the ratings agencies, and was published before the downgrade, not much was said:
It was not in the short term economic interest of either Moody’s or S&P, however, to provide accurate credit ratings for high risk RMBS and CDO securities, because doing so would have hurt their own revenues. Instead, the credit rating agencies’ profits became increasingly reliant on the fees generated by issuing a large volume of structured finance ratings.
Of course the SEC and other comical regulatory bodies “missed” these rampant abuses and frauds in the lead up to the housing bubble; it allowed for the show to go on. The gravy train was going to keep on chugging until it ran out of fuel. The American economy was fine and dandy, until the day of reckoning came. However, even in the immediate aftermath of the collapse of the American economy, the relationship of convenience was maintained. The quid pro quo lived on: rating agencies were free to keep the American people and investors under the illusion that everything was AAA-OK as long as that meant the people stayed off the streets. The Oracle of Omaha and Whore of Wallshington St., Warren Buffett, absolved the rating agencies:
I am much more inclined to come down hard on the CEOs of institutions that caused the United States Government to come in and necessarily bolster them than I am on somebody that made a mistake that 300 million other Americans made.
The ancient Oracle truly outdid himself this time. Holding people accountable for failing to do their job or doing it poorly? Forget about it!
Such sleazy alliances of convenience permeate American foreign policy. Libya is perhaps the most glaring example of the new Millenium. The Gulf of Sidra incident and the Lockerbie bombing ended all hopes of normalized relations between America and Libya. Then, in December of 2003, Libya, in hopes of not being the next Iraq, announced that it would cease and destroy all weapons programs that the international community deemed unacceptable. The Great Resistor of Imperialism in the Maghreb folded without much of a fight. By May of 2006, an American embassy in Libya was opened and Libya lost its designation of state sponsor of terrorism. Moammar Gaddafi even went to far as to helping the United States fight the “War on Terror.”
But then the Arab spring came. Libyans from all walks of life rose up against dictator Moammar Gaddafi. Just like Syria’s Assad, Egypt’s Mubarak, and Bahrain’s King Khalifa, this thug acted brutally, repressing the people’s peaceful calls for social, political, and economic reform. America, desperate to actually look like they stood for human rights, decided to act. Little did Washington know, much of the world watched as America turned a blind eye to brutal repression in Egypt, Bahrain, and Yemen, all allies of the United States. NATO and the US, however, had to do something about pesky Moammar Gaddafi. They finally got their chance with Operation Odyssey Dawn.
Civilians, Gaddafi loyalists, and rebels alike were bombed to bits by NATO and US planes in hopes of regime change. The Libyan Transnational Council was quickly recognized as the rightful representatives of the Libyan people. The mission was pretty much complete, although Gaddafi still remains at large.
While S&P remains in business, their offices are being raided in Italy. Perhaps the same fate awaits S&P’s Washington bureau. Only time will tell. One thing is for certain, however. Moody’s will continue to be Washington’s right hand man until they, too, bite the hand that feeds.