Note to Konczal: S&P Was Also Motivated By Criminal Self-Interest

You might remember that last year, the rating company S&P lowered the rating of U.S. securities. As Mike Konczal correctly notes, this has not been borne out by economic reality:

ratings

At this point, the real interest rates on U.S. government debt are so low, investors are taking a loss to hold U.S. securities (which tells us just how shitty the global economy is–and also how few investment opportunities there are). Where I disagree with Konczal is on the issue of motives (boldface mine):

S&P did this because they didn’t like the politics of the debt ceiling, implicitly blaming the Republicans’ aggressive threat of a default on the national debt to obtain their political goals. “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.” And they did this because they wanted to nudge Congress to make big, Grand Bargain type changes. S&P was worried that, in the aftermath of the debt ceiling agreement, “new revenues have dropped down on the menu of policy options” and “only minor policy changes on Medicare and little change in other entitlements” would potentially be achieved in the near future.

While I agree that S&P is playing politics, what Konczal ignores is S&P’s desire to avoid prosecution. Not only did every negative statement by the rating agencies coincidence with action by the Securities and Exchange Commission, but they also wanted to head off legislation that would have made ratings agencies liable for ridiculous ratings.

There is no conceivable way to understand the last decade without viewing it, in part, as a criminal, not economic, event. And, yes, we are governed by sociopaths.

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