The Credibility of Credit Agencies

Peter Chatwell is almost spot on here. He says that Moody's "report is a warning shot to governments, setting out the line that they can’t cross with their budgets." Actually, he's only off by a single letter.
This is Moody's putting on a show of the Burlesque variety, all tease and no tits, to convince someone, anyone, that they and their brethren credit agencies are even remotely relevant or accurate. Remember that these are the same companies that would, by their own admission, rate a "deal structured by cows." A long time ago I said that this crisis would cause the US to lose its AAA rating, but I've long since realized that the rating is meaningless - and that it will never change. The dubious relationship between a sell-side research analyst and his bank's top client appears downright honorable when compared to that of a rating agency and firms that write agencies checks to grade their bonds.
Look, you can't have Mark to Magic without the magicians, but now that the rabbit is out of the hat and into the frying pan the curtain must fall on this sideshow.

clipped from www.bloomberg.com. The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service. The company’s baseline scenario assumes that all current AAA sovereigns will keep their ratings over the next three years. Under its adverse scenario, which assumes 0.5 percent lower growth each year, less fiscal adjustment and a stronger interest-rate shock, the U.S. will be paying about 15 percent of revenue in interest payments, more than the 14 percent limit that would lead to a downgrade to AA. Achieving the fiscal consolidation necessary to avert a downgrade will test “social cohesion” and may involve rewriting the “social contract” between governments and their people, Cailleteau said. “People have to decide what level of pain they are willing to accept to have a healthy economy.”

Two-face would be more appropriate than Joker

All of a sudden, or rather after reports of Banks' PACs and executives switching their donations to the elephant after the donkey's teat turned sour, Obama comes out as a supporter of bonuses and a champion of capitalism, telling Democrats that "We’ve got to be the party of business, small business and large business.”

clipped from www.bloomberg.com President Barack Obama speaking in an interview, said in response to a question that while [Dimon's bonus of] $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.” Dimon, 53, led New York-based JPMorgan, the second-biggest U.S. bank, to a profit during each quarter of the financial crisis. Blankfein, 55, was at the helm when New York-based Goldman’s shares doubled last year as profit soared to a record high. [Sounds like they didn't just make the Series: Dimon won the Golden Glove, and Blankfein got the Cy Young trophy too.] “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free-market system.” President Barack Obama called bank bonuses “obscene” at least twice this year. Obama is “trying to walk a very fine line,” said Mark Borges, a compensation consultant “He wants to represent popular anger at the bailout and Wall Street pay, while at the same time trying not to alienate these guys, who he needs [to give him the "obscene" amounts of money that he relied on to win the 2008 election.]

The New State of the Union

clipped from dealbook.blogs.nytimes.com President Obama plans to call on Thursday for taxing about 50 big banks and major financial institutions for at least the next decade to recoup all taxpayer losses from the Wall Street bailout fund. While the banks maintain that taxpayers made money from the bailout to save them (many have repaid their federal funds with interest and the government also has made money in selling the banks’ warrants that it held as collateral), losses to the bailout fund are expected from money paid to rescue the automakers Chrysler and General Motors and the insurance giant American International Group, and from a program to help troubled homeowners avert foreclosures. The administration official said that the auto manufacturers and A.I.G., as well as the housing finance giants Fannie Mae and Freddie Mac, both of which now are under government conservatorships, are not in a financial position to be taxed to recover taxpayers’ losses. The administration is calling the tax a “financial crisis responsibility fee,”

Taxing those who paid their loans back early and at a profit to the American people to pay for failures who are explicitly excluded from the tax and calling it a "responsibility fee" is perverted irony that passes for logic in the current Administration.
I'm not saying the banks didn't have a hand in the crisis because that's just as absurd as saying that they were more responsible than Washington lawmakers gagged by lobbying bribes and regulators who should be charged with criminal negligence. Let's not forget the American people, so quick to let their fingers be pointed for them at an easily vilified target. Groupthink on this scale hasn't been seen in 70 years. Nobody wants to blame themselves when it's so much easier to demand reparations from the rich with your head held high. After all, in our culture that honors victims before heroes being impoverished connotes a certain moral superiority - which makes it all the easier to remind the wealthy of their noblesse oblige.