Get sick, get well
Hang around a ink well
Ring bell, hard to tell
If anything is goin' to sell
-- Bob Dylan

Tuesday, February 5, 2013

Standard & Poor's -- No standards but a lot of folks made poor

Forget for a brief moment that the current Illinois teacher-pension crisis is a manufactured one, caused primarily by the state's inability or unwillingness to raise enough revenue to make it's necessary contribution to the pension fund. Forget also for a brief moment, that the state legislature grabbed millions from that fund, into which retirees had been paying out of their take-home pay for decades and used that money to pay off other debts.

Let's look for a moment instead at how the threat by Gov. Quinn, and other Dems,of a reduced state credit rating by Standard & Poor's, was used to try and steamroll the legislature into passing SB1. That bill would have dropped an unconstitutional bomb on the cost-of-living adjustments and the health care contributions being made by the state to aged, sick and poorest retirees.

S&P, which is owned by McGraw-Hill Publishers (one of the nation's largest testing and textbook companies) went along with the pension-crisis narrative and announced on January 24th that IL's credit rating has been downgraded again making it the nation's lowest.

ABC reported,
"Standard & Poors analysts said even if Illinois is able to pass pension legislation soon, the state is likely to face a legal challenge, so it could be years before the budget situation or the unfunded liability improve. That, along with an income tax increase that's scheduled to expire on Jan. 1, 2015, contribute to the state's negative economic outlook."
And you can count on those S&P analysts to make an honest assessment of a state's credit worthiness. Right? Well let's have a look and see.

Today, the Justice Dept. announced that it was suing S&P for its actions in rating the complex securities that helped cause the global financial crisis by misleading investors with falsely high credit ratings on bonds backed by toxic subprime mortgages.

According to the L.A. Times:
S&P executives were motivated by a desire to increase the company's profits and delayed downgrading its AAA ratings on the mortgage-backed securities because it did not want to lose business from banks trying to package bad loans for sale to investors to get them off their books...
Lisa Madigan announces S&P suit. 
 In addition to the federal suit, California, Illinois and several other states filed their own suits against S&P on Tuesday on top of some existing state suits. S&P's intentionally misleading information of these securities could have contributed to the drubbing many state pension funds took during the past five years. The actions mean that 16 states and the District of Columbia will have suits against S&P.

The irony here is that it was Illinois Atty. Gen. Lisa Madigan who announced the state's suit against S&P while her father, political machine boss Mike Madigan, along with Quinn, used the threat of a poor S&P rating to launch the stampede on the pension fund.

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