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Investment Watch

X22 Report is a daily show that will cover issues surrounding the economic collapse

Monday, June 24, 2013

By Michael Mccune: The Rant (government auditor for 16 years) - Rating Agencies Fraud Could Derail Economy Immediately - (( to Have Michael send you the Rant to your Email contact Him Here (( memccunewyo@yahoo.com ))

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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