Rating Agencies
Fraud Could Derail Economy Immediately
Look at Wall Street numbers for the past
week. Everything is dropping. The Dow Jones Industrial Average is off about
1,000.
The economic experts repeatedly refer to the veiled hints in
the qualified statements emanating from the Federal Reserve meeting last week as
the source for such a drop. Redirect your attention for a moment to history for
that is where the true answer lies.
Most know the run-up in the markets after the 2007 recession was due to
the extensive printing press program of Fed Chairman Ben "BS" Bernanke. Without
his unwavering support for inflation the market would probably be digging hard
to get to 7,000 based on the loss of real value in the companies represented
there.
The government SEC regulators have threatened the ratings agencies for
downgrading the U.S. in that time frame but the bankers the regulators oversee
were the beneficiaries of the huge bailout and are rolling in the profits the
bailout has provided while paying miniscule interest rates to the
people--depositors--who make the banks workable in the first place.
But, thanks to the hard work of a San Diego law firm, Robbins Geller
Rudman & Dowd more of the sordid story is coming to light.
RGR&D have uncovered a veritable mountain of evidence the meltdown in
the real estate market was not dur to the homeowners as much as it was the
combined efforts of the government policies, government regulators and the
ratings agencies themselves.
The trouble started with the ratings agencies. At heart, they are
dishonest. A phony fabrication not based on merit but on the amount of funding
someone (bankers) were willing to pay to keep the rating of the securities they
held (sub-prime mortgages) at a much higher level than they should have been to
please the bank examiners whcih had to follow the laws handed down by Congress
which forced the lending institutions to forgo such important considerations as
"whether or not the lendee could actually repay the loan."
So the rating agencies were selling a lie, the bankers were eating it up,
the regulators were following policy set by Congress and the American taxpayer
was the fall guy for the whole bottleneck.
The law firm dug up correspondence after correspondence that requires we
abandon the worthless rating systems completely and immediately. To quote one
(as reported by Rolling Stone): "Lord help our...scam...this has to be the
stupidest place [Standard and Poor's] I have ever worked at." Another email
read, "Let's hope we are wealthy and retired by the time this house of card
falters."
Too late for the taxpayer but our government seems to have added one more
stupid item to its already overflowing plate.
In February the Obama Justice Department filed a $5 billion civil suit
against S&P after executives with the firm admitted to government
invesitgators that they had shaded their rating methods to protect market share.
This information was gleaned after the government began investigating
S&P for downgrading the U.S. status a notch to AA+.
If the whiz boys in the Capiol were as good they claim they should have
known all they had to do was grease S&P, Moody's, Fitch and Egan Jones
collective palms with some of that printed money flowing from the Fed's printing
press to keep the AAA status.
But the Washington geniuses didn't seem to know that little trick so they
sued.
The suit, along with the sub-prime mortgages derivatives trade, is
bringing more dirt to light than the government is going to like even though the
current brunt of the assault is aimed at the ratings agencies.
But, I think the fallout from this disclosure by RGR&D is what is
driving the markets down right now--far more than any of the hints coming from
the Fed meeting last week.
Traders have to stay on top of things. This ratings fraud inquiry has
more potential to unseat the government than the rating agencies it is going
after.
Think how fast the value of the dollar could fall if the ratings
agencies--because of the government suit--are forced to be accurate with their
ratings! We could go from the world's top currency to the lower tier very
quickly. Maybe Switzerland, in all the world, would have its currency survive
the fallout from such a precipitate drop.
But in the U.S. we could go from having a substantial but somewhat
manageable bonded debt service to one that surpasses the rest of the budgetary
items altogether.
The banking system would fail almost as rapidly, leaving hundreds of
millions of Americans with no way to obtain necessary day-to-day items. The
government's precious economic activity indicators would bottom within a
week.
Then it won't matter how much the printing press is run, the country will
be helpless. Elected officials will (Horrors!) actually have to deal with a
problem directly and immediately. Those Washington buffoons will be hoisted on a
petard of their own making.
So listen to the rumbles coming from the lawsuit handled by Robbins
Geller Rudman & Dowd. The inept bunglers in Washington stepped in another
cow pie they themselves
dropped a short time ago. When you don't know what you are doing but try to
bluff your way through, as Obama and the current Congress are doing, you end up
eating your own cow pie.
The economy, unfortunately, is about to take a bigger hit than it did in
2007 with Lehman Brothers' default.
"I have sworn on the altar of God eternal hostility to
every form of tyranny over the mind of man."--Thomas Jefferson
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