What chafed me was I remembered that bond rating agencies, including Moodys and Standard and Poors, had been involved in conflict of interest and unwarranted optimism exacerbating the current economic crisis. A somewhat spicier write-up is online here.
The situation is so jacked up that rating agencies actually started claiming immunity from liability for their ratings by claiming they had free speech rights like (and no more responsibility than) a movie reviewer. Unfortunately for them (WSJ):
Manhattan federal Judge Shira Scheindlin dealt a blow to ratings firms, rejecting a free-speech defense asserted by Moody’s Investors Services and Standard & Poor’s.
Do those names sound familiar?
I am not claiming that COR's AAA ratings are fraudulent. I do think they are unlikely to stay AAA if we keep up the profligate spending, including elective project spending and overpayment of top officials. My suspicion has been that COR wanted to shoehorn in a huge bond because they know/fear/suspect that the AAA bubble will burst sooner rather than later. I sure would like to be wrong about this.
3 comments:
Those in the know have been aware of this shell game for a long, long time. Enron is not the only organization that lied about its "off balance sheet" financial condition.
People have to ask themselves why the City has failed to produce a proper audit of all funds, and why only a handful of accounts are presented during budget season as the total picture. The answer is fairly obvious...something fishy is going on.
I find it curious that City leaders are so free with so-called "economic development, or ED" incentives in anticipation of voter approval of an upcoming bond election. In other words, they are so confident, even in these tough economic times, that the voters will blindly approve yet another $66 million, 30-year I owe you, that they have already given away a huge chunk of the money they expect to get out of the yet-to-be-affirmative bond election.
Who lives like that?
The uptick in the rating the city just received was not for anything done here in Richardson, it was nothing more than reindexing. Ian pointed this out on the DMN blog.
Here is an interesting article from the IBD.
http://www.investors.com/NewsAndAnalysis/Article.aspx?id=531813
I especially like this paragraph:
The analysts also think that lending to state and local governments isn't risky because they — unlike private firms — have a captive source of funds. State and local governments can always tax their residents and businesses more.
So now you have a new perspective on the ratings some hold so dear!
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