Bachmann's Refusal To Raise Debt Ceiling Perceived As Anti-Business (Tea Party Extremism)

Bachmann Claims ‘S&P Essentially Proved Me Right’ — S&P Really Disagrees

Last night, during both the GOP presidential primary debate and a post-debate interview with Fox News’ Sean Hannity, Rep. Michele Bachmann (R-MN) claimed that S&P’s downgrade of the United States creditworthiness vindicated her position that the debt ceiling should not have been raised. “Standard & Poor’s essentially proved me right,” she told Hannity, after telling the debate audience that the S&P downgrade came about because the agency said “we don’t have an ability to repay our debt”:

We just heard from Standard & Poor’s, when they dropped our credit rating and what they said is we don’t have an ability to repay our debt. That’s what the final word was from them. I was proved right in my position. We should not have raised the debt ceiling.

After this performance, it’s blatantly clear that Bachmann has no idea what S&P said, because just about every word out of her mouth regarding the agency’s decision was incorrect. For starters, S&P never said “we don’t have an ability to pay our debt.” After all, the agency still rates the U.S. as AA+, meaning it has a “very strong capacity to meet financial commitments.” One S&P analyst characterized the difference between AA+ and AAA as just “degrees of excellence.”

Furthermore, the reasons that S&P issued the downgrade — as it clearly laid out in its release on the subject — were the use of the debt ceiling as a political football and GOP intransigence on taxes. As National Journal put it, “It’s hard to read the S&P analysis as anything other than a blast at Republicans.”

A Standard & Poor’s director added one more justification to the mix yesterday, saying “that one reason the United States lost its triple-A credit rating was that several lawmakers expressed skepticism about the serious consequences of a credit default”:

Without specifically mentioning Republicans, S&P senior director Joydeep Mukherji said the stability and effectiveness of American political institutions were undermined by the fact that “people in the political arena were even talking about a potential default,” Mukherji said.

“That a country even has such voices, albeit a minority, is something notable,” he added. “This kind of rhetoric is not common amongst AAA sovereigns.”

Of course, one of those people expressing skepticism about the severe consequences of not raising the debt ceiling was none other than Michele Bachmann.


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Sources: Fox News, Newsweek, Standard & Poor's, Think Progress, Wikipedia, Youtube, Google Maps

Jim Clyburn Calls Out Credit Downgrade As Bad Political Move

SC Rep. Clyburn: debt rating call political

U.S. Rep. James Clyburn criticized Standard & Poor's downgrade of America's debt rating on Tuesday, saying he thinks the decision was based more on politics than economics.

The Democrat from South Carolina told reporters he's concerned the decision focused on Washington's fractious political climate rather than America's actual ability to pay its debts.

"I think this is very unfortunate. I think it was underserved, but I don't think it was unexpected," Clyburn said of Friday's decision, which has since touched off turmoil in stock markets around the globe.

On Monday, S&P managing director David Beers said on ABC's "Good Morning America" that the agency's decision was based on several factors, including damage done to America's reputation by the debt ceiling controversy and concerns that public finances are on an unsustainable path.

Asked if he had any second thoughts about the downgrade, Beers said, "Absolutely not."

For the first time ever, S&P downgraded the U.S. rating, cutting it to "AA+" from AAA. Two other ratings agencies — Moody's and Fitch — said they were keeping the AAA rating for now.

Asked about the S&P decision, Clyburn said, "Their reasons seemed to be focused on politics, rather than economics. They talked about the brinkmanship going on in Washington. I know there's brinkmanship going on in Washington. The public knows that. But I don't know whether that ought to be taken into consideration when you're talking about whether or not you can pay your debts."

The No. 3 House Democrat said he thinks the manner in which the debate over the debt ceiling unfolded is "a question of public process, not the ability to pay the bills. I have a problem with that."

Clyburn says he's pleased the two other major credit agencies kept the country's top credit rating, comparing it to a batter who is able to hit two out of three pitches in a ball game.

He said he believes the Bush-era tax cuts should not be extended and tax loopholes closed, instead of cutting entitlement programs, in order to help solve the nation's budget problems.

The best way for the nation to get away from a climate of brinkmanship is to "elect people who believe in give and take," the congressman said.


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Sources: Canadian Business, MSNBC, Youtube, Google Maps

Bernanke Keeps Interest Rates Low Despite S & P's Political Downgrade

Full text of the Fed's Statement:

For immediate release

Information received since the Federal Open Market Committee met in June indicates that economic growth so far this year has been considerably slower than the Committee had expected. Indicators suggest a deterioration in overall labor market conditions in recent months, and the unemployment rate has moved up. Household spending has flattened out, investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand.

Temporary factors, including the damping effect of higher food and energy prices on consumer purchasing power and spending as well as supply chain disruptions associated with the tragic events in Japan, appear to account for only some of the recent weakness in economic activity. Inflation picked up earlier in the year, mainly reflecting higher prices for some commodities and imported goods, as well as the supply chain disruptions. More recently, inflation has moderated as prices of energy and some commodities have declined from their earlier peaks. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee now expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, downside risks to the economic outlook have increased. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent.

The Committee currently anticipates that economic conditions--including of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ these tools as appropriate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action were: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an extended period.



What Happens After the Credit Downgrade?

On Friday the U.S. ratings agency Standard & Poor's slapped the United States with a downgrade, demoting the country from a top-notch AAA credit rating to AA+. Although the nation's other two major agencies, Moody's Investor Service and Fitch Ratings, reaffirmed the United States' AAA credit rating, S&P's move triggered fear through the stock market, which on Monday had its worst day since the 2008 financial crisis.

S&P took further action on Monday, downgrading to AA+ the credit ratings of Fannie Mae, Freddie Mac and other entities linked to long-term U.S. debt.

In a statement Friday outlining their reasoning, S&P cited a shaky political climate in Washington, D.C., that nearly caused the country to default on its loans, the fact that $2 trillion in spending cuts under the final debt-ceiling/budget deal fall short of the $4 trillion needed to actually lower deficits in coming years and the refusal from congressional Republicans to raise tax revenues. Some excerpts:

"We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.

" ... The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.

" ... Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.

If U.S. Treasury bond investors take heed of S&P's downgrade, they could demand higher interest rates from the government -- which would in turn cause interest rates to rise on all Americans. Yet despite the worries stirred up by such a worst-case-scenario "if," President Obama has taken a more reassuring position. In remarks on Monday, he maintained that U.S. treasuries are still the safest investment in the world and that the government is fully capable of paying its debt.

"Markets will rise and fall, but this is the United States of America," the president said. "No matter what some agency may say, we've always been and always will be a AAA country."

Obama agreed with S&P on one thing, though: Political gridlock has indeed kept the government from effectively managing its debt. "We knew from the outset that a prolonged debate over the debt ceiling -- a debate where the threat of default was used as a bargaining chip -- could do enormous damage to our economy and the world's," he said -- although without specifically calling out Republicans.

With that, he launched into his regular stump speech as of late, about solving the debt problem with measures beyond just spending cuts.

"Last week, we reached an agreement that will make historic cuts to defense and domestic spending. But there's not much further we can cut in either of those categories," he said. "What we need to do now is combine those spending cuts with two additional steps: tax reform that will ask those who can afford it to pay their fair share and modest adjustments to health care programs like Medicare."

So ... are we going to be OK or not? The Root spoke with Wilhelmina A. Leigh, senior research associate on economic security for the Joint Center of Political and Economic Studies about what the credit downgrade means for your finances, S&P's spotty track record on good judgment and whether this will give Congress the urgency it needs to seriously tackle the deficit.

The Root: Should S&P have downgraded the U.S. credit rating?

Wilhelmina A. Leigh: I'm not sure I can answer that question. I have to assume that S&P has a list of criteria that you have to meet for a certain rating, and that they made their assessment based on that. However, I'm also aware that before the rating was downgraded, there had been conversations between the Treasury Department and S&P about it.

S&P made a mistake in how they assessed what our debt would be by the year 2021 -- their math as off by $2 trillion. The Treasury Department pointed out that S&P's numbers were in error, and then it appears that S&P said, "Well, we're going to go ahead and [downgrade you] anyway." That could cast some doubt around S&P having looked carefully at whether the U.S. meets AAA criteria. If they decided to just do it based on erroneous data, that could put the downgrade in a different light.

TR: S&P's past mistakes also include AAA ratings provided for Enron, Lehman Brothers and the subprime junk mortgages that triggered the 2008 financial crisis ...

WAL: I think, in some ways, they may have done this as a way to try to clear up their own bad image -- to make it seem like, "This country screwed up, but we're on top of things."

TR: There have been some foreboding suggestions that the S&P credit downgrade means that our standing in the bond market will plummet, causing creditors to turn away from U.S. Treasury bonds and hike up our interest rates. Is that an accurate forecast?

WAL: I don't know that S&P has that much power. If the other rating services, Moody's and Fitch, followed suit, then I would say that we should be very, very concerned. I think what happens from here depends on what the other rating services do.

In the meantime, President Obama is correct that U.S. Treasury bond is one of the most stable, if not the most stable, investment that can presently be made. Our standing in the bond market is still very good, even though the stock markets have gone a little crazy. But there are so many uncertainties, and that's the bottom line here. If the U.S. were facing its challenges, and there weren't ongoing problems in the rest of the world, like in the European markets, then I don't think people would be as jittery about it.

TR: Do you think that more credit rating agencies will follow suit?

WAL: My sense is that if they were going to, they would have done it by now. Moody's, for example, mentioned earlier that they were monitoring the [debt ceiling negotiations] very closely, and I think enough time has passed for them to have looked at how that situation was handled and have made their assessment. So far they haven't acted.

TR: President Obama suggested that the downgrade will light a fire under lawmakers on the joint "super committee" to get serious about taking a balanced approach that combines budget cuts with raising tax revenues. Do you think this stands to make a difference in our gridlocked political discourse around the deficit?

WAL: When I heard that S&P had downgraded the U.S. credit rating, I thought, Maybe this will jolt Congress into realizing that this is more serious than just saying, "Oh, we can pay off our interest but we don't have to pay off the principal." I mean, something has to wake these folks up. It's like cutting away bone and flesh without adding anything. You just can't solve the problem that way.

TR: What if Democrats and Republicans are unable to bridge their differences on that issue? Is there any other way to get the economy growing, or are we just stuck?

WAL: The only two general ways that I know to do that are to cut spending, and the other is to raise taxes. The form that doing either one of those takes will make all the difference. Hopefully, whatever package they come up with will have in it enough of a stimulating effect, so that the economy can move forward. It's not going to be pleasant for many people, but if they can do it in a way where people can see progress, economic growth and a light at the end of the tunnel, then that amounts to something.

Sources: ABC News, AP, Fox News, Huffington Post, PBS, The Root, Yahoo News, Youtube

GOP Wants To Fire Geithner! White House Pushes Back

Boehner wants Geithner out of the center of the economic storm

House Speaker John Boehner (R-Ohio) wants Timothy Geithner to resign as secretary of the Treasury, according to an aide to the GOP leader.

Boehner has called on Geithner to step down before, but an aide to Boehner reaffirmed Saturday morning that the Speaker wants Geithner to leave.

Other prominent Republicans have called on Geithner to step down in the wake of the Standard & Poor’s decision Friday to downgrade the nation’s credit rating from AAA to AA+.

"The President should demand that Secretary Geithner resign and immediately replace him with someone who will help Washington focus on balancing our budget and allowing the private sector to create jobs," Sen. Jim DeMint (R-S.C.) said in a statement Friday.

"For months he opposed all efforts to reduce the debt in return for a debt ceiling increase. His opposition to serious spending and debt reforms has been reckless and now the American people will pay the price," DeMint said.

Rep. Michele Bachmann (R-Minn.), the Tea Party star running for president, called for Geithner’s ouster during an appearance on Fox News.

“I call on the president to seek the immediate resignation of Treasury Secretary Tim Geithner and to submit a plan with his list of cuts to balance the budget this year, turn the economy around and put our people back to work,” she told Fox’s Greta Van Susteren.

Sen. Rand Paul (R-Ky.), a co-founder with DeMint of the Senate Tea Party Caucus, also called for Geithner to step aside.

“We must get new leadership, and put in place people who have seen problems coming and offered credible solutions, rather than those who continue to misdiagnose and mismanage our economy,” Paul said Saturday.

While Geithner has been the target of conservatives’ criticism, within the administration he has argued for deficit reduction, squaring off at times with advisers, such as Larry Summers, the former head of the National Economic Council, who argued for more stimulus spending.

Boehner called on both Geithner and Summers to resign in a speech to the City Club of Cleveland last year, raising hackles at the White House.

"Never before has the need for a fresh start in Washington been more pressing," said Boehner said a few months before the 2010 mid-term elections.

He charged the “the lack of real-world, hands-on experience shows in the policies coming out of this administration.”

Vice President Joe Biden pushed back immediately.

“After months of promising a look at his party’s agenda for their plans for America, their economic agenda, he made what was billed this morning as a major economic address, and his chief proposal when you look at it apparently was that the president should fire his economic team,” Biden said in a sarcastic riposte at the time. “Very constructive advice and we thank the leader for that.”


Sources: AP, Fox News, MSNBC, The Hill, Youtube

Obama Vs. Liberals & Dems: "He's Too Soft On GOP & Tea Party" (Decision 2012)

Obama's soft response to Tea Party draws liberal criticism

Liberals are growing frustrated with President Obama’s soft response to the Tea Party after fractious negotiations over the debt limit led to the loss of nation’s AAA credit rating on Friday.

Republicans and Democrats have unleashed fusillades of attack against each other in the wake of the announcement but Obama has stayed quiet, frustrating his party’s base.

“It’s hard to see how we avoid a Tea-Party recession if the president who has the biggest megaphone in the country is not willing to speak clearly on the issue,” Justin Ruben, executive director of MoveOn.org, told The Hill in a Saturday afternoon interview.

Ruben said Obama should never have allowed Tea-Party lawmakers in the House to treat a debt-limit extension as a concession to Democrats given the nation’s entire economy depended on it.

By accepting the threat of a national default as politically valid, Obama put himself at a major disadvantage in the talks, he said.

“It’s a terrible deal that will destroy jobs and big part of reason is because president accepted the premise that it was okay to hold economy hostage,” Ruben said. “Instead of saying, 'this is outrageous' and ‘You will not threaten the full faith and credit of the U.S.,’ and telling America what the Republicans are doing, he sat down and said, 'let’s bargain' and tried to show he was more reasonable.”

Reuben said a potential default should have never been within the parameters of the debate.

“That table should not have existed,” he said.

Liberal activists were instrumental to Obama beating Hillary Clinton in the caucus states — which require more opportunities for face-to-face persuasion than larger states — during the 2008 Democratic presidential primary.

MoveOn.org endorsed Obama on Feb. 1, 2008, shortly before Super Tuesday, a crucial round of balloting.

Obama won the nomination by racking up wins — often by large margins — in smaller states with caucus systems, such as Iowa, Colorado, Idaho, Minnesota, North Dakota and Nebraska. Clinton captured large states with primaries such as California, Ohio, New York, Pennsylvania and Texas.

The president has been careful not to blame the Tea Party for the nation’s credit downgrade even though many Democrats and some independent political experts think he could make a strong case.

“The President believes it is important that our elected leaders come together to strengthen our economy and put our nation on a stronger fiscal footing,” said White House press secretary Jay Carney in a statement that seemed anodyne compared to the remarks of GOP presidential candidates and lawmakers.

“The bipartisan compromise on deficit reduction was an important step in the right direction. Yet, the path to getting there took too long and was at times too divisive. We must do better to make clear our nation’s will, capacity and commitment to work together to tackle our major fiscal and economic challenges,” Carney said.

This type of response has led some of the president’s supporters to think that he is bringing a plate of muffins to a street brawl.

Republican presidential candidates Mitt Romney and Michele Bachmann led the attack against Obama on Friday night.

“America’s creditworthiness just became the latest casualty in President Obama’s failed record of leadership on the economy,” Romney said in statement. “His failed policies have led to high unemployment, skyrocketing deficits, and now, the unprecedented loss of our nation’s prized AAA credit rating.”

Rep. Michele Bachmann (R-Minn.), who is vying to win the Iowa Republican caucus next year, turned up the rhetoric even higher.

“This president has destroyed the credit rating of the United States through failed economic policies and his inability to control government spending by raising the debt ceiling,” she said. “President Obama is destroying the foundation’s of our economy one beam at a time.”

Bachmann voted against the final debt deal, as well as the Speaker John Boehner's (R-Ohio) proposal. She also accused the Obama administration of "scare tactics" for warning about a possible U.S. default if no action were taken.

Obama may be trying to neutralize the acid partisan environment in Washington, which Standard & Poor’s cited in its decision to downgrade the U.S.

“We have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon,” Standard & Poor’s wrote in its overview.

Ross K. Baker, a political science professor at Rutgers University, who has studied Congress throughout his career and served fellowships in the Senate, said he thinks the Tea Party is more responsible for standoff that led to Friday’s downgrade.

“I think they shoulder a major responsibility for the blame. They set the agenda,” Baker said. "The advent of such a large number of house members endorsed by the Tea Party made sure that budget cutting was going to be on the advantage. They pressed their advantage beyond which a point compromise was possible."

Baker characterized the president’s pushback against the Tea Party as lacking muscle.

“The president has to put some muscle in his rhetoric and go after the Tea Party as home wreckers. I think the president in following his own precept in being a conciliator. It’s great and quite noble but he’s in a situation in which he really has to stand up for things in which he believes,” Baker said.

Democratic senators did not think Obama used his bully pulpit effectively to set up the negotiations.

Sen. Frank Lautenberg (D-N.J.) told The Hill at the end of June “the leadership has to be more outspoken and make the case.”

“This is the biggest courtroom in the world, and you can’t get a verdict that is positive without making the argument,” he said.

They were more critical when speaking on condition of anonymity.

House Democratic leaders did not follow Obama’s example in reacting to Standard & Poor’s downgrading, placing blame squarely on Tea Party Republicans.

"The American people need the Republicans to stop their reckless and irresponsible political games that led to this unfortunate downgrade,” said House Assistant Democratic Leader James Clyburn (S.C.). “They have repeatedly walked away from the negotiating table whenever the two sides got close to a balanced blend of both spending cuts and revenue raisers.”

Rep. Steve Israel (N.Y.), chairman of the Democratic Congressional Campaign Committee, said: "The indisputable fact is that until this group of Roadblock Republicans forced Speaker Boehner to walk away from a deal, America never came to the brink of a default and we never experienced a downgrade. This downgrade is the direct result of Roadblock Republicans."

Sources: CNN, MSNBC, The Hill

Standard & Poor's Role In 2008 Market Crash Possibly Criminal; Investigation Needed!

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Senate report on Wall Street crash: The criminalization of the American ruling class

The US Senate Permanent Subcommittee on Investigations released a voluminous report last Wednesday on the Wall Street crash of 2008 that documents the fraud and criminality that pervade the entire financial system and its relations with the government.

The 650-page report is the outcome of a two-year investigation that involved over 150 interviews and depositions as well as the examination of subpoenaed emails and internal documents of major banks, government regulatory agencies and credit rating firms. The report, entitled “Wall Street and the Financial Crisis: Anatomy of a Financial Collapse,” establishes that the financial crash and ensuing recession were the result of systemic fraud and deception on the part of the mortgage lenders and banks, carried out with the collusion of the credit rating corporations and the complicity of the government and its bank regulatory agencies.

The World Socialist Web Site will analyze the contents of this important document in detail in the coming days. However, its basic thrust is clear. As the executive summary states: “The investigation found that the crisis was not a natural disaster, but the result of high-risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.”

At a press conference Wednesday and in subsequent interviews, Senator Carl Levin (Democrat from Michigan), the chairman of the subcommittee, was even more explicit. “Using emails, memos and other internal documents,” he said, “this report tells the inside story of an economic assault that cost millions of Americans their jobs and homes, while wiping out investors, good businesses and markets. High-risk lending, regulatory failures, inflated credit ratings and Wall Street firms engaging in massive conflicts of interest contaminated the US financial system with toxic mortgages and undermined public trust in US markets.

“Using their own words in documents subpoenaed by the subcommittee, the report discloses how financial firms deliberately took advantage of their clients and investors, how credit rating agencies assigned AAA ratings to high-risk securities, and how regulators sat on their hands instead of reining in the unsafe and unsound practices all around them. Rampant conflicts of interest are the threads that run through every chapter of this sordid story.”

Levin went on to say that the investigation had found “a financial snake pit rife with greed, conflicts of interest, and wrongdoing.” He told the New York Times: “The overwhelming evidence is that those institutions deceived their clients and deceived the public, and they were aided and abetted by deferential regulators and credit ratings agencies who had conflicts of interest.”

The report is divided into four sections, each focusing on a different contributor to the network of fraud and abuse: the mortgage lenders, the regulators, the credit rating firms and the Wall Street investment banks. The first section takes Washington Mutual (WaMu) as its case history, detailing the predatory and deceptive lending practices and accounting and reporting subterfuges that led, following the implosion of the subprime mortgage market, to the bank’s collapse and takeover by JPMorgan Chase in September of 2008.

The second examines the corrupt role of the federal Office of Thrift Supervision (OTS), which oversaw three of the biggest financial failures in US history—Washington Mutual, IndyMac and Countrywide Financial. “Over a five-year period from 2004 to 2008,” the report states, “OTS identified over 500 serious deficiencies at WaMu, yet failed to take action to force the bank to improve its lending operations and even impeded oversight by the bank’s backup regulator, the FDIC.”

The third section documents the systematic manner in which the rating firms Moody’s and Standard & Poor’s gave top credit ratings to collateralized debt obligations (CDOs) and other complex securities backed by subprime and other toxic mortgages, enabling the banks to make billions of dollars by palming off these junk securities as top-grade investments. In return, the rating companies raked in huge profits for their services.

As the report states: “Credit rating agencies were paid by Wall Street firms that sought their ratings and profited from the financial products being rated… The ratings agencies weakened their standards as each competed to provide the most favorable rating to win business and greater market share. The result was a race to the bottom.”

The final section examines the fraud and deception perpetrated by the major investment banks as they profited first from the inflation of the US housing market and then from its implosion. It takes as its examples Goldman Sachs and Deutsche Bank. Goldman began betting heavily in 2007 that the housing market would collapse, packaging and selling subprime mortgage-backed CDOs even as it secretly bet that the same securities would plummet in value.

The report cites emails by Deutsche Bank’s top global CDO trader, Gregg Lippman, calling risky mortgage securities marketed by the bank “crap” and “pigs” and the bank’s operations a “CDO machine,” which he characterized as a “Ponzi scheme.”

The document points to the central role of the big Wall Street banks in promulgating the fraud, stating: “Investment banks were the driving force behind the structured finance products that provided a steady stream of funding for lenders originating high-risk, poor-quality loans and that magnified risk throughout the US financial system. The investment banks that engineered, sold, traded and profited from mortgage-related structured finance products were a major cause of the financial crisis.”

The overall picture is one of criminality on the part of the entire financial establishment that, with all levels of government serving as its co-conspirator, systematically looted the economy in order to further enrich itself. The result is a social tragedy for tens of millions of people in the US and many millions more around the world. And yet, the result of this historic crime is that the bankers and speculators are richer and more powerful than ever.

Not a single senior executive at a major US bank, hedge fund, mortgage firm or insurance company has gone to jail. Not one has even been prosecuted.

There is every indication that none will be criminally indicted in the future. As with the similarly damning report released in January by the US Financial Crisis Inquiry Commission, the Senate report has been largely buried by the mass media. It was reported perfunctorily on the inside pages of some of the major newspapers and barely mentioned by the broadcast and cable networks, and then dropped.

One day after the release of the Senate report, the New York Times published a long article on the failure to prosecute any of the Wall Street criminals. It recounted a private meeting between the then-president of the Federal Reserve Bank of New York (now Obama’s treasury secretary) Timothy Geithner and then-New York Attorney General Andrew Cuomo in October 2008 at which Geithner urged Cuomo to back off on investigations of the banks and rating agencies.

The article contrasted the absence of criminal charges against bankers today with the aftermath of the savings and loan debacle of the late 1980s, when government task forces referred 1,100 cases to prosecutors and more than 800 bank officials went to jail. It noted the precipitous decline in referrals by bank regulators to the FBI, from 1,837 cases in 1995 to 75 in 2006. Over the ensuing four years, at the height of the financial crisis, an average of only 72 a year have been referred for criminal prosecution.

The Office of Thrift Supervision has not referred a single case to the Justice Department since 2000, and the Office of the Comptroller of the Currency, a unit of the Treasury Department, has referred only three in the last decade.

How is this to be explained? Why are Goldman CEO Lloyd Blankfein, JPMorgan CEO Jamie Dimon, the former CEO of Washington Mutual, Kerry Killinger, as well as Treasury Secretary Geithner and his predecessor, Henry Paulson (previously CEO of Goldman), not in prison?

Such financial manipulators are being shielded while workers are being stripped of their jobs, wages, homes and basic social services to pay for the debts resulting from the transfer of trillions in public funds to the banks. Collective resistance to this attack is being criminalized in the form of anti-strike laws, imposing fines and jail terms for workers who fight back.

One reason for the absence of prosecutions is the power of the individuals involved, all of whom wield immense influence over politicians, the media and the legal system. But it goes deeper than the status of individuals, just as the sordid state of affairs as a whole arises not from individual greed, but rather from a profound crisis of the entire system.

The criminalization of the American ruling class is the outcome of more than three decades in which the accumulation of wealth by the corporate-financial elite has become increasingly separated from real production. In its pursuit of profit, the ruling class has dismantled huge sections of industry and turned ever more decisively to financial manipulation and speculation.

The ascendancy of the most parasitic sections of the capitalist class has been accompanied by a sharp decline in the living standards of the working class. The richest and most powerful layers have acquired staggering levels of wealth by plundering society.

The ruling class itself senses that to prosecute any of the leading figures in the defrauding of the American people (and the rest of humankind) would rapidly expose the criminality of the entire system. It would mean putting the capitalist system itself on trial.


Sources: AP, MSNBC, World Wide Socialist

S & P's John Chambers Pushed Fake Debt Crisis Further To The Right! Demanded Cuts!

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The S&P debt warning: Wall Street extortionists demand savage cuts

Five days after the US Senate Permanent Subcommittee on Investigations released a voluminous report detailing the criminal activities of the banks and credit rating firms that precipitated the 2008 Wall Street crash and global recession, one of the named culprits, Standard & Poor's Credit Ratings Services, issued an ultimatum to the White House and Congress demanding an agreement on savage austerity measures ahead of the 2012 elections.

In lowering its outlook from "stable" to "negative" on the top AAA rating for US Treasury bonds, S&P spoke Monday for the entire financial mafia that is headquartered on Wall Street. The ratings firm declared in a press release that failure to reach an agreement in the coming months to reduce the federal deficit by at least $4 trillion over the next decade "could lead us to lower the rating."

This amounts to a threat to crash the US and global economy and undermine the status of the dollar as the world reserve currency. The move is part of an internationally orchestrated drive by the major banks and speculators to push through devastating attacks on the living standards of the American working class.

They are applying to the United States the extortionate methods used previously to stoke up speculative attacks on the sovereign debt of a number of European countries, including Greece, Ireland, Portugal and Spain. S&P and its major ratings rivals Moody's and Fitch have issued strategically timed credit warnings and downgrades to create a crisis atmosphere, which governments have then utilized to override popular opposition and impose mass layoffs and wage cuts and shred social programs.

John Chambers, chairman of the sovereign ratings committee at S&P, virtually admitted as much, according to a report in Tuesday’s Wall Street Journal. The Journal wrote: “If the US reaches a British-style resolution, S&P will restore the US outlook to stable, Mr. Chambers said.”

In May of 2009, S&P lowered Britain’s credit outlook. It reversed the action 17 months later after the newly elected Conservative-Liberal Democrat coalition government announced a program of draconian cuts that will shatter the country’s social safety net.

Readers can make their own judgment as to S&P’s standing to be issuing such ultimatums. The Senate report on the Wall Street crash describes the corrupt process by which S&P routinely slapped AAA ratings on worthless securities marketed by the banks as follows: “Credit rating agencies were paid by Wall Street firms that sought their ratings and profited from the financial products being rated… The ratings agencies weakened their standards as each competed to provide the most favorable rating to win business and greater market share. The result was a race to the bottom.”

Senator Carl Levin, the chairman of the subcommittee, described what the investigation uncovered as “a financial snake pit rife with greed, conflicts of interest and wrongdoing.”

By rights, the top S&P executives who presided over this fraud and pocketed multi-million-dollar salaries in the process should be sitting in prison. Instead, still at their posts and having suffered no consequences, they are using the disaster of their own making to gut bedrock social programs such as Medicare, Medicaid and Social Security upon which tens of millions of people depend.

The statement issued by S&P on Monday described both the Republican fiscal year 2012 budget plan and that outlined by President Obama last week as a basis for cutting the federal deficit by $4 trillion. However, the two sides had to come to an agreement before the national election in 2012, the company insisted.

This demand underscores the anti-democratic character of the so-called budget debate. It is an elaborate charade, behind which stands the dictatorship of the banks. The deal to eviscerate what is left of the social reforms of the 20th century has to be sealed before the elections to make sure that the vote in no way becomes a referendum on austerity and the electorate has absolutely no say in the matter.

The mass opposition to the measures being proposed by both parties is well known to Wall Street and its political servants in Washington. On Monday, the same day as the S&P announcement, McClatchy Newspapers published the results of a McClatchy-Marist poll showing that voters by a margin of 2-to-1 support raising taxes on incomes above $250,000, with 64 percent in favor and 33 percent opposed. They oppose cutting Medicare and Medicaid by 80-18 percent.

S&P intervened at the behest of the banks to shift the phony budget debate even further to the right and create the conditions for even deeper cuts than those being currently proposed. Interviewed Monday on Bloomberg Television, David Beers, S&P’s global head of sovereign finance ratings, said the $4 trillion deficit-cutting target was “not enough to ultimately halt the rising trajectory of US debt.” It was, he said, merely “a useful starting point.”

The establishment media immediately signaled that it had gotten the message. The Los Angeles Times editorialized that “Congress and the White House can’t afford to ignore this warning shot.” The Financial Times of London published an editorial that declared, “S&P’s warning shot should galvanise America’s leaders.”

Democratic leaders rushed to reassure Wall Street that they were on board. Speaking at a community college in Virginia Tuesday, Obama said, “I believe that Democrats and Republicans can come together to get this done.”

Steny Hoyer of Maryland, the No. 2 Democrat in the House of Representative, said Monday, “Today’s revised outlook shows the urgent, bipartisan action needed to put our nation on a serious path to reduce deficits.”

Erskine Bowles, a former White House chief of staff for Bill Clinton and co-chair of last year’s bipartisan fiscal commission, was even more emphatic. Speaking to the Financial Times, he said S&P had been “absolutely right” in lowering its outlook on US debt. “If anything, they understate the extent of the problem,” he said.

Only a mass, independent movement of implacable opposition by the working class can defeat this criminal conspiracy. The World Socialist Web Site and the Socialist Equality Party urge workers and young people to reject the entire framework of the so-called budget debate. There must be uncompromising opposition to any cuts in jobs, wages or social programs and services. The working class bears no responsibility for the crisis of the capitalist system.

We propose an alternate policy. As a down payment, to begin to recoup the wealth plundered by the financial elite, we propose a 50 percent tax surcharge on all household wealth over $5 million.

This should be supplemented by raising the income tax on households taking in more than $500,000 a year to 90 percent.

These measures will not only generate hundreds of billions of dollars for jobs, schools, health care, housing and pensions, they will attack the profligate squandering of resources and contribute mightily to the moral as well as the economic health of society.

These initial steps lead inexorably to the nationalization of the banks and major corporations and their transformation into public utilities under the democratic control of the working population. This is a socialist program. It requires that the working class break politically from the two parties of big business and build a mass movement to fight for a workers’ government.

Sources: CNN, MSNBC, World Wide Socialist

Standard & Poor's Fires Back At Criticism Of U.S. Downgrade! Endorses Tax Increases!!

Amid Criticism on Downgrade, S.&P. Fires Back


A day after Standard & Poor’s took the unprecedented step of downgrading the creditworthiness of the United States government, the ratings agency offered a full-throated defense of its decision, calling the bitter stand-off between President Obama and Congress over raising the debt ceiling a “debacle,” and warning that further downgrades may lie ahead.

In an unusual Saturday conference call with reporters, senior S.& P. officials insisted the ratings firm hadn’t overstepped its bounds by focusing on the political paralysis in Washington as much as fiscal policy in determining the new rating. “The debacle over the debt ceiling continued until almost the midnight hour,” said John B. Chambers, chairman of S.& P.’s sovereign ratings committee.

Another S.& P. official, David Beers, added that “fiscal policy, like other government policy, is fundamentally a political process.”

Administration officials at the White House and Treasury angrily criticized S.& P.’s action as based on faulty budget accounting that discounted the just-enacted deal for increasing the debt limit.

The agreement set spending caps in the fiscal year that begins Oct. 1 and calls for a bi-partisan Congressional “super committee” to propose more deficit reduction — for up to $2.5 trillion in combined savings over a decade.

“The bipartisan compromise on deficit reduction was an important step in the right direction,” the White House press secretary, Jay Carney, said in a statement on Saturday. “Yet, the path to getting there took too long and was at times too divisive. We must do better to make clear our nation’s will, capacity and commitment to work together to tackle our major fiscal and economic challenges.”

The ratings agency put additional pressure on the joint Congressional committee to find additional spending cuts, tax hikes or both to bring down the inexorably rising national debt.

Still, the posturing on Capitol Hill continued.

“Unfortunately, decades of reckless spending cannot be reversed immediately, especially when the Democrats who run Washington remain unwilling to make the tough choices required to put America on solid ground,” Speaker John A. Boehner, an Ohio Republican, said in a statement.

Senate Majority Leader Harry Reid said the downgrade affirmed the need for the Democratic approach, which would combine spending cuts with tax increases.

The decision, he said, “shows why leaders should appoint members who will approach the committee’s work with an open mind — instead of hardliners who have already ruled out the balanced approach that the markets and rating agencies like S.& P. are demanding.”

Even as the ratings agency insisted on Saturday that its move shouldn’t have come as a shock, it reverberated around the world as political and financial leaders scrambled to assess its impact on the already troubled world economy.

China, the largest foreign holder of United States debt, said on Saturday that Washington needed to “cure its addiction to debts” and “live within its means,” just hours after the S.& P. downgrade.

While Europeans had girded for a possible downgrade, the news that S.& P. had actually yanked the United States’ AAA rating was nonetheless received with a degree of alarm in the corridors of power across the Continent. Finance Minister François Baroin of France questioned the move Saturday, noting that the figures used by S.& P. didn’t match those of the Treasury, and overstated the federal debt by about $2 trillion.

Mr. Baroin said he found it curious that neither Moody’s nor Fitch, the two other major ratings agencies, had reached a similar conclusion. Moody’s has said it was keeping its AAA rating on the nation’s debt, but that it might still lower it.

“We have total confidence in the solidity of the American economy,” Mr. Baroin said in an interview on French radio. Nonetheless, he added, the decision confirms that the world’s most developed economies are confronted with the same urgent priorities: to lift growth and reduce public and private debt.

The lowering of a core financial instrument of the global economy is freighted with symbolic significance, but carries few clear financial implications. The downgrade could lead investors to demand higher interest rates from the federal government and other borrowers, raising costs for local governments, businesses and home buyers. But many analysts say the impact could be modest, in part because the other ratings agencies, Moody’s and Fitch, have not downgraded the government at this time.

The wrangling over the downgrade to AA+ from AAA stretched over days. S.& P. executives came to the Treasury Department earlier in the week to meet with a group of administration officials led by Mary J. Miller, the assistant secretary for financial markets, who is one of the government’s main liaisons to the rating agencies, according to a government official with knowledge of the meeting.

At the meeting, the S.& P. executives walked the Treasury team through its analysis, the official said. Even then, Treasury officials raised concerns about the methodology. S.& P. pointed out that there were at least three sets of assumptions that could be made to project future growth in government spending, according to the official.

The Congressional Budget Office projects spending in two ways — one that shows Congress increasing spending for the domestic and defense programs it finances annually by the projected rate of inflation, and another that shows spending rising by a higher amount pegged to the expected growth in the nation’s gross domestic product.

The Treasury argued for a third way, that would make sure that whichever so-called base line S.& P. used, it would take into account the spending caps and deficit reduction that Congress and the White House agreed to in the recent debt-limit deal.

Rumors of a potential downgrade started swirling through the financial markets on Friday morning, causing stocks to fall sharply. Although Moody’s and Fitch had affirmed the government’s AAA rating late Tuesday afternoon, S.& P. was silent.

But around 1:30 p.m on Friday, S.& P. sent a memorandum outlining its preliminary position, including specific figures underscoring their argument for a downgrade. Treasury officials were told that S.& P. planned to make its announcement after 4 p.m., when the stock market closes, according to two administration officials.

Treasury officials flagged a concern over how S.& P. crunched the numbers. S.& P. had chosen to assume that government spending grew at the pace of economic growth, rather than rely on numbers that incorporated the new spending limits into its actual budget projection. That is what Treasury officials are now calling a $2 trillion error — and raised the issue with S.& P.

In Saturday’s conference call, the Mr. Chambers said the $2 trillion difference, in one scenario for 2021, equals only about 2 percent of gross domestic product, and doesn’t alter the fundamental reality that the country’s debt burden will continue to rise.

Randy Neugebauer, a Texas Republican who heads the House Financial Services’ subcommittee on oversight and investigations, said that while it was appropriate for S.& P. to consider the political situation in its analysis, it was speculative of it to use predictions of what Congress will likely do in the future as a rationale for a downgrade.

“One thing that puts them out in uncharted waters is trying to predict what the political environment is going to be,” Mr. Neugebauer said. “They’re not predicting an overly cooperative environment in Congress and that’s a very subjective call.”

The ratings agencies, for their part, spent Saturday trying to defend their positions on the nation’s debt. Moody’s and Fitch analysts said Saturday that a downgrade remains a possibility. “Our rating is AAA until the day it changes,” said David Riley of Fitch in London. “That being said, we haven’t formally reaffirmed the rating.”

Moody’s has reaffirmed the AAA, though it put the country on negative watch on Tuesday. The company’s sovereign analyst said Saturday that his company is not as concerned about Washington’s political gridlock.

Steven Hess, a Moody’s analyst, said the debt deal “is not enough, but we thought a downgrade would be premature given that they have come up with a plan for deficit reduction.”

Sources: AP, CNN, Fox News, NY Times, Youtube