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“First We’ll Undermine Wall Street”: Standard And Poor’s Had This Planned From The Start!

One of the funnier items in the news this past week was the assertion by lawyers for Standard & Poor’s that the Department of Justice, which is suing the agency for fraud, is just trying to punish it for its downgrade of U.S. credit in 2011.

S&P was one of the agencies that gave high ratings to complicated and very unsound investment instruments, especially collateralized debt obligations, in advance of the financial crisis. Since the agencies’ fees were paid by the same banks issuing the securities they were charged with evaluating, the agencies had no reason to be neutral in their assessments. They knew just how dangerous the securities were, but they were paid to look the other way.

Matt Taibbi looks over the evidence:

In incriminating e-mail after incriminating e-mail, executives and analysts from these companies are caught admitting their entire business model is crooked.

“Lord help our fucking scam…this has to be the stupidest place I have worked at,” writes one Standard & Poor’s executive. “As you know, I had difficulties explaining ‘HOW’ we got to those numbers since there is no science behind it,” confesses a high-ranking S&P analyst. “If we are just going to make it up in order to rate deals, then quants [quantitative analysts] are of precious little value,” complains another senior S&P man. “Let’s hope we are all wealthy and retired by the time this house of card[s] falters,” ruminates one more.

Had the agencies been doing their job correctly, poor ratings would have forced bankers to stay away from the toxic assets. “The firm provided cover,” Michael Hiltzick writes. “No securities trader would be fired for taking the plunge on a mortgage-backed security, no matter how dubious, if it bore the seal of approval of S&P.” Senior bank executives would have had a better idea of how much risk these supposedly safe investments really entailed, and they would have been able to prepare for, or even avert, the collapse.

After the national embarrassment that was the negotiation over the federal debt ceiling in 2011, S&P revoked its perfect “AAA” credit rating for United States. Now, the agency claims that the government’s lawsuit is “retaliation for defendants’ exercise of their free speech rights with respect to the creditworthiness of the United States of America.”

A few points. First, this defense contradicts another argument S&P made earlier this year: that everyone should have ignored S&P’s ratings because (and I kid you not) no reasonable investor would ever rely on them, and therefore S&P should not be blamed for the catastrophe. If that is true, and the ratings are completely and utterly meaningless, then S&P’s decision to downgrade Treasuries simply cannot be interpreted as a statement about the creditworthiness of the United States.

S&P’s earlier position, absurd though it is, actually has a basis in reality. The agency studiously ignored the dangers accumulating in the financial system, and then, when it revoked the government’s AAA rating, the entire world studiously ignored S&P. Investors, having learned that whatever S&P says about your creditworthiness is basically horsesh, made their own decision about the likelihood of a U.S. default and continued buying Treasury bonds. Interest rates actually fell, as Hiltzik notes. “Maybe S&P is still trying to prove its point that no one ought to take it seriously,” Paul Barrett writes.

Finally, S&P’s sanctimonious posturing after the debate over debt ceiling and its measured statement of profound concern regarding the stability of the national economy in the long term appear particularly hypocritical given its share of the responsibility for the financial crisis. Indeed, had S&P done its part to maintain the stability of the global financial system, the federal government’s finances would be much stronger now.

Maybe someone at S&P had the entire charade planned from the very beginning. “First we’ll blow up Wall Street,” I can imagine him saying. “Then, to protect ourselves from fraud litigation, we’ll make sure we’re the first to question the federal government’s creditworthiness after Congress responds to the crisis with a massive fiscal stimulus. It will look like retaliation if they try to sue us then.” Fortunately for the rest of us, this strategy probably won’t quite work all the way.

 

By: Max Ehrenfreund, Washington Monthly Political Animal, September 8, 2013

September 9, 2013 Posted by | Big Banks, Financial Crisis | , , , , , , , | 1 Comment

“The Wonk Gap”: The GOP’s Near Complete Lack Of Expertise On Anything Of Substance

On Saturday, Senator John Barrasso of Wyoming delivered the weekly Republican address. He ignored Syria, presumably because his party is deeply conflicted on the issue. (For the record, so am I.) Instead, he demanded repeal of the Affordable Care Act. “The health care law,” he declared, “has proven to be unpopular, unworkable and unaffordable,” and he predicted “sticker shock” in the months ahead.

So, another week, another denunciation of Obamacare. Who cares? But Mr. Barrasso’s remarks were actually interesting, although not in the way he intended. You see, all the recent news on health costs has been good. So Mr. Barrasso is predicting sticker shock precisely when serious fears of such a shock are fading fast. Why would he do that?

Well, one likely answer is that he hasn’t heard any of the good news. Think about it: Who would tell him?

My guess, in other words, was that Mr. Barrasso was inadvertently illustrating the widening “wonk gap” — the G.O.P.’s near-complete lack of expertise on anything substantive. Health care is the most prominent example, but the dumbing down extends across the spectrum, from budget issues to national security to poll analysis. Remember, Mitt Romney and much of his party went into Election Day expecting victory.

About health reform: Mr. Barrasso was wrong about everything, even the “unpopular” bit, as I’ll explain in a minute. Mainly, however, he was completely missing the story on affordability.

For the truth is that the good news on costs just keeps coming in. There has been a striking slowdown in overall health costs since the Affordable Care Act was enacted, with many experts giving the law at least partial credit. And we now have a good idea what insurance premiums will be once the law goes fully into effect; a comprehensive survey by the Kaiser Family Foundation finds that on average premiums will be significantly lower than those predicted by the Congressional Budget Office when the law was passed.

But do Republican politicians know any of this? Not if they’re listening to conservative “experts,” who have been offering a steady stream of misinformation. All those claims about sticker , for example, come from obviously misleading comparisons. For example, supposed experts compare average insurance rates under the new system, which will cover everyone, with the rates currently paid by a handful of young, healthy people for bare-bones insurance. And they conveniently ignore the subsidies many Americans will receive.

At the same time, in an echo of the Romney camp’s polling fantasies, other conservative “experts” are creating false impressions about public opinion. Just after Kaiser released a poll showing a strong majority — 57 percent — opposed to the idea of defunding health reform, the Heritage Foundation put out a poster claiming that 57 percent of Americans want reform defunded. Did the experts at Heritage simply read the numbers upside down? No, they claimed, they were referring to some other poll. Whatever really happened, the practical effect was to delude the right-wing faithful.

And the point is that episodes like this have become the rule, not the exception, on the right. How many Republicans know, for example, that government employment has declined, not risen, under President Obama? Certainly Senator Rand Paul was incredulous when I pointed this out to him on TV last fall. On the contrary, he insisted, “the size of growth of government is enormous under President Obama” — which was completely untrue but was presumably what his sources had told him, knowing that it was what he wanted to hear.

For that, surely, is what the wonk gap is all about. Political conservatism and serious policy analysis can coexist, and there was a time when they did. Back in the 1980s, after all, health experts at Heritage made a good-faith effort to devise a plan for universal health coverage — and what they came up with was the system now known as Obamacare.

But that was then. Modern conservatism has become a sort of cult, very much given to conspiracy theorizing when confronted with inconvenient facts. Liberal policies were supposed to cause hyperinflation, so low measured inflation must reflect statistical fraud; the threat of climate change implies the need for public action, so global warming must be a gigantic scientific hoax. Oh, and Mitt Romney would have won if only he had been a real conservative.

It’s all kind of funny, in a way. Unfortunately, however, this runaway cult controls the House, which gives it immense destructive power — the power, for example, to wreak havoc on the economy by refusing to raise the debt ceiling. And it’s disturbing to realize that this power rests in the hands of men who, thanks to the wonk gap, quite literally have no idea what they’re doing.

By: Paul Krugman, Op-Ed Columnist, The New York Times, September 8, 2013

September 9, 2013 Posted by | GOP, Politics | , , , , , , , | Leave a comment

“Life After John Boehner”: Things Could Get Much Worse In The House And It Looks Like They Will

In non-Syria news, HuffPo’s Ryan Grim and Jon Ward reported yesterday that some GOP Hill rats are now starting to say on background what most of us have been assuming for quite some time—that John Boehner won’t seek reelection in 2014 and thus will end his tenure as speaker.

If so, he will have lasted just four years, and, it must be said, a pretty crappy four years, when the House has passed almost no meaningful bills and when the most meaningful one it did pass, the sequester, is widely acknowledged to be a disaster and an admission of Congress’s inability to do its job. And remember, we still have, after the Syria vote, the looming government shutdown and the debt-limit fight coming this fall. A brief government shutdown and a credit default, while undesirable generally, would provide fitting capstones to a terrible tenure.

Now of course all this failure isn’t his fault. He’s got a lot of people in that caucus who weren’t elected to govern, but to burn down. His length of tenure reflects this problem. As speaker, you have to make some sort of attempt to govern. That’s the gig. But when half or more of your caucus is against governing, well, they’re going to get mad at you and consider you a sellout. As Grim and Ward point out, he won the speakership last time by just three votes.

It’s worth reflecting on this before he goes back to Cincinnati (back to Cincinnati? What am I talking about? He’s staying right here, I would imagine, and will earn a few million dollars a year as a post-lobbyist lobbyist, doing most of his work on the courses at Burning Tree and Congressional; I guess in a way he will have earned that, and a carton of smokes): the current House Republican caucus doesn’t want a speaker who will attempt to perform the basic job of speaker—shepherd through compromise spending bills in a semi-timely fashion, work with the Senate to pass a few other respectably significant bills, keep something resembling an orderly appearance. Boehner did none of these things, and probably couldn’t do any of them. Immigration is a great case in point, when he was forced by the yahoos to say he wasn’t taking up the Senate bill at all.

But the more important question is who replaces him. HuffPo:

The assumption that Boehner’s departure is imminent has set off a round of jockeying for the positions that would open up. The current power structure includes an ad hoc leadership-in-waiting, consisting of five conservatives who serve as go-betweens for the leadership and the tea party. Getting the blessing of that group is usually the first step toward getting broader tea party buy-in. According to GOP sources, this group includes Reps. Jeb Hensarling (Texas), Jim Jordan (Ohio), Paul Ryan (Wis.), Tom Price (Ga.) and Steve Scalise (La.). All but Ryan have chaired the Republican Study Committee, the bloc of arch-conservatives in the House. Much of the speculation has focused on Hensarling, chairman of the Financial Services Committee, who is considered a viable candidate for either speaker or majority leader. Price, who lost a leadership race last round to Rep. Cathy McMorris Rodgers (Wash.), is considered a viable challenger to current Majority Whip Kevin McCarthy (Calif.).

A grim menu. These people make Boehner look like Nelson Rockefeller. Under any of them, the point of the House of Representatives will be to throw as many wrenches into as many gears of government as they can possibly get away with. You think things couldn’t get worse? Oh, trust me, they could get much worse. And it looks like they will.

 

By: Michael Tomasky, The Daily Beast, September 5, 2013

September 6, 2013 Posted by | John Boehner | , , , , , , , , | Leave a comment

“Priority Deficit Disorder”: When Congressional Republicans’ Homework And Playtime Are At Odds

Back in March, just two months into the new Congress, Rep. Mike Kelly (R-Pa.) conceded that he had a small problem. He’d been assigned the task of working on loan guarantees for clean-energy companies, and was supposed to write legislation. But that never happened — Kelly got distracted.

His spokesperson said at the time, “It was a priority, and it remains an issue of interest. But Mike’s efforts shifted when he chose to focus more on holding the administration accountable with regards to Fast and Furious. And then when the Benghazi tragedy occurred, that took the cake.”

In other words, there was real work to do, but the Pennsylvania Republican couldn’t get to it because he decided made-up political “scandals” were a better use of his time.

Six months later, those attitudes continue to dominate the House GOP’s thinking.

Republicans on Capitol Hill are acknowledging that the fall’s looming fiscal fights could peel attention away from their investigation into the IRS’s singling out of conservative groups. […]

But Republicans have also made the IRS investigation a key part of their recent political message, at a time when the agency is trying to implement the Democratic healthcare law that conservatives are itching to defund. The controversy has also helped revive a Tea Party movement that had been flagging in recent months.

With all that in mind, GOP aides stress that the congressional investigation into the IRS will be moving full speed ahead, even as a potential debt default takes up much of the oxygen in the halls of Congress.

This will, by the way, include even more hearings into the discredited controversy.

John Feehery, a GOP strategist, told The Hill that Republicans “have to make the connection” between the non-existent IRS story and the Affordable Care Act “because it’s so hot right now.”

Oh for crying out loud.

Look, the House of Representatives is in session only nine days this month. Nine. Congress just took a four-week break, but the Republican-led lower chamber apparently wants to ease back into their work schedule.

On the to-do list? A budget crisis, a debt-ceiling crisis, a farm bill, immigration reform, appropriations bills, and fixing the Voting Rights Act. It’s simply unrealistic to think the dysfunctional House will complete all of these tasks, or even most of them, anytime soon, though a couple of these are non-optional.

But despite all of this work that remains undone, much of which should have been completed before the August recess, House GOP leaders are still eager to invest time and energy in a “scandal” that no longer makes any sense. Why? Apparently because it’s “so hot right now.”

It reminds me a lot of a child who prioritizes playtime over homework. Sure, the homework is important, but it’s not nearly as fun or satisfying as playing — so the child decides some of the homework just won’t get done.

Republicans remain a post-policy party. They have real work to do, which they will neglect because their shiny plaything has a firm grip on their limited attention span.

 

By: Steve Benen, The Maddow Blog, September 3, 2013

September 4, 2013 Posted by | Republicans | , , , , , , , , | Leave a comment

“A Whole New Concept”: On Syria, Congressional Republicans Are Put Into The Position Of Actually Having To Govern

By seeking congressional approval for military action against the Syrian government, President Obama has accomplished something that the nation hasn’t seen in some time: He’s compelled Republicans to divert their attention from their concocted crises to an issue of actual substance.

As the August recess unfolded, Republicans — including a number of prospective presidential candidates — contemplated whether to shut down the government as a protest of Obamacare and whether to refuse to honor the nation’s debt as a cri de coeur against Obamacare or the deficit or Obama himself or perhaps modernity in general. These issues were debated at length, if never quite in depth, on right-wing talk radio and Web sites. That nobody but the hard-core Republican right seemed stirred by shuttering the government and defaulting on the debt mattered not at all.

If the American right increasingly seems to occupy an alternative planet, that’s largely because its media outlets — we can throw Fox News into the mix — dwell on stories so exquisitely calibrated to excite the right that they may not be stories at all. The New Black Panther Party? The Epidemic of Voter Fraud? The calculated perfidy of Benghazi? The impeachable crime of Obamacare (a socialist scam actually modeled on a proposal from a conservative think tank 20 years ago)? It’s not the editorials and opinionating of right-wing broadcasters and journalists that are driving the right into fantasyland. It’s the tales they spin into stories and the time and space they devote to events that never actually happened or that they surreally misconstrue.

By throwing the Syrian conundrum to Congress, Obama has at least confronted Republicans with a real-world choice. Since Saturday, the drumbeat for closing down the government has been muted in its usual haunts.

That’s why the coming collision of libertarian fantasies with reality will be instructive. Can a congressman vote to defund the government and approve a military action in the same month? Or vote to authorize cruise missile attacks while insisting the government default on its debts? All these issues will soon come before Congress in rapid succession.

The U.S. government has obligations to the American people even more fundamental than seeking to stop the use of chemical weapons that are killing innocents in a foreign land. It provides pensions to the elderly, health coverage to the old and the poor, and, in a few months, it will help Americans without health insurance buy private coverage. It has obligations that conservative opposition has kept it from meeting — among them, repairing and modernizing the nation’s infrastructure and creating the jobs (say, by repairing the infrastructure) that the nation’s private-sector employers are unable or unwilling to create.

Conservatives routinely disparage such basic government functions. But even right-wing media have to acknowledge the legitimacy of government when employing the armed forces is at issue. Whether it is wise or prudent to employ those forces is always the most legitimate of questions. Whether the nation should halt such actions, or the payment of its pensions and health-care obligations, because the government should stop functioning altogether until Obamacare or Obama or modernity just go away is not.

In theory, House Speaker John Boehner, who has spent decades in government, does not support its abolition. In practice, he has been cowed by his party’s libertarian right and by the increasing dissolution of other strains of Republicanism, which is why he has occasionally threatened both closure and default. As the share of Americans who support and identify with Republicans shrinks in the polls, the faithful who remain have taken on the aspects of a cult — secure in the knowledge of “facts” that aren’t facts, passionate about causes whose very existence bewilders their compatriots, determined to punish any believers who stray from the fold.

Now Syria has popped the balloon of their insular summer. Right-wing Republicans may decide not to authorize a strike because they want to embarrass the president, but even they must know that there’s more at stake than their war on Obama: life and death; the future of a crumbling country and a volatile region; our own security as well as U.S. credibility. There may even be more things in heaven and earth than are dreamt of in what passes for their philosophy.

 

By: Harold Meyerson, Opinion Writer, The Washington Post, September 3, 2013

September 4, 2013 Posted by | Republicans, Syria | , , , , , , , | Leave a comment

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