The Standard&Poor’s warning on U. S. debt is being treated as Holy Writ, driving markets down and inspiring Chicken Little clucking in the financial world, but few are questioning the source.
We are not talking about the Vatican here but a for-profit company, owned by McGraw-Hill publishers, that has taken a public beating for over-rating the mortgage derivatives that led to an economic meltdown and is currently being investigated by the European Commission for “monopoly abuse” in its charges for debt data.
A skeptic might be tempted to think that S&P’s bold stance has as much to do with its own rehabilitation as with macroeconomics. One equity-firm head puts it baldly:
“I have stopped paying any attention to anything that S&P says or does. Its performance over the past decade has revealed it to be incompetent and corrupt–it sold its AAA ratings to the highest bidder. It is the broker who lost all your money, the girlfriend who cheated on you, the partner who stole from you.”
That said, the political world, including the White House, is welcoming the flawed messenger’s message–that partisan jockeying over U. S. debt can spook lenders, including China, who are underwriting our deficits.
On the day of Pulitzer Prize announcements, the S&P flap is yet another reminder of how information flows in the 24/7 era of facts, factoids and fake news. For the first time, the national reporting award goes to journalism that did not appear in print–ProPublica’s online series, “The Wall Street Money Machine.”
Copyright 2011 The Moderate Voice