The Debt Ceiling

well they were enablers who understated the risk of these bubbles. many of these sketchy transaction would of never happen without their approval.

 

Wow. So you are saying that the banks that did all the financial finagling with sub-prime mortgages, the elected officials that deregulated the banks so they could do these things and the people that grossly over-extended themselves, should not take the blame.

Rather you suggest that S&P allowed all of this to happen. Nice revisionist history.

 

My understanding of the credit rating agencies in misapplying ratings to CDOs and CMOs is that they were using flawed models to estimate the risk involved with these securities. This isn't surprising, because CDOs and CMOs are ridiculously complicated. That and the rating agencies have an incentive to rate securities higher because they're being paid to rate the securities by the very same people who issue the securities.

What the credit rating agencies didn't do was force loan providers to give out subprime loans. They didn't force lenders to give out loans without verifying income. They didn't force people to sign mortgage agreements that they didn't understand. They didn't force everybody to buy credit default swaps on CDOs. A whole lot of people had to fuck up bad and they all magnified the effect of each other's fuckups. And geez, wouldn't you know it, the greed of a relative minority of powerful people ruined it for everyone.

I think it makes sense to distrust the rating agencies. But I don't think it makes sense to automatically assume that they're wrong.

 

of course the banks are to blame, credit ratings organizations played a huge role as well. i'm not revising history.

 

google Matt Taibbi's articles about Wall St. and you can see EVERYONE who is to blame. S&P was definitely a big part of it

 

You can blame S&P for the downgrade. You can blame S&P, the banks and Wall Street for the sub-prime crisis. IMO, that is just a diversion.

Ultimately, Congress and the president are the only ones who can craft a solution to the long-term debt problem and there is plenty of blame to go around on the Hill and the White House as well.

But, economist across the political spectrum know that the solution will require spending cuts AND revenue increases.

And I place greater blame on those who refuse to even put revenue increases on the table. And that would be the Republicans, and particularly the new Tea Party members who consider compromise a dirty word.

I also blame those who have blocked legislative attempts to regulate Wall Street and the banks more effectively. The Dodd-Frank bill that was passed last year with no Republican support (http://www.govtrack.us/congress/bill.xpd?bill=h111-4173 ) is far from perfect but it was a step in the right direction and, since its passage, the Republicans have gutted it, by blocking appointments, blocking funding, and effectively preventing its implementation.

 

Of course S&P was involved. But writing, as you did, "S&P allowed this to happen" puts a lot more emphasis on S&P's actions (i.e. if they didn't allow it, it would never have happened) than is the reality. There are a number of parties involved in this. Personally, I have more issues with the governments (both Democrat and Republican) that have been involved in deregulating the banking and finance rules that had been so effective prior to this happening (Canada did not deregulate, despite the desire to do so but our current Conservative government, and it avoided much of the mess that the US currently finds itself in).

I also blame ignorant politicians who remain inflexible on budget policy. More stimulus money is needed. More cuts are also needed. And more revenue in the form of taxes are needed.

To focus *solely* on spending cuts is too simplistic.

 

Less belief in money might be too simplistic as well. I have more than I'm really comfortable with/why not lend it at interest rates that would make a whore blush? Why not pretend that I'm worth more because I have more? Why should the US, major unpaid creditor & "winner" of the last big war, renege on its debts? Because it's wrong, of course. Because it really owes anybody anything? I wonder...