The Liar's Poker Circular Firing Squad
The S&P and the Feds? "You kinda want them both to kill each other," Fox News financial analyst Charlie Gasparino told Neil Cavuto earlier today. Brutally expressed, but I'm sure there's plenty who would agree with the sentiment:
Fox News financial analyst Charlie Gasparino offered little sympathy for credit ratings agency Standard & Poor (S&P) following allegations that the White House is exacting revenge over a credit downgrade, saying that “you kinda want them both to kill each other.”
Gasparino spoke with Fox’s Neil Cavuto Wednesday about the new report, which claims that former Treasury Secretary Tim Geithner promised S&P it would be held “accountable” for its 2011 move to downgrade the U.S. government’s credit rating. Many have characterized Geithner’s remarks as a thinly-veiled threat against the private agency, particularly since the government filed a $5 billion fraud lawsuit against S&P just weeks later.
Though the analyst didn’t dispute that characterization, he did note that both sides may have a point in this case. “I know we’re trying to look for white hats and black hats here,” he began, “[but] you kinda want them both to kill each other. The government created the financial crisis along with S&P, and now the government is going after S&P.”
S&P is being sued for deliberately rating junk mortgage-backed securities much higher than they were actually worth, prompting unsuspecting investors to buy billions of the worthless product. The government, amongst other things, pushed absurdly risky mortgage policies on banks in an effort to increase home ownership in impoverished communities.
Two of the biggest-selling financial books of the 1980s were Connie Bruck's The Predator's Ball, on how the now-defunct Drexel Burnham Lambert created the low rated, high-yield (aka junk) bond market, and Michael Lewis' Liar's Poker, which dealt with how the now-defunct Salomon Brothers, with a whole lot of help from the government and the savings & loan industry, created the mortgage-backed securities market. Shortly after those books were written, Bill Clinton cranked the knobs on Jimmy Carter's Community Reinvestment Act up to 11. The result was the implosion of 2008, the big government-spawned crisis that Rahm Emanuel implored Barack Obama not to go to waste, which led to that recovery summer....that's just around the corner. Any day now. I'm sure it'll be here someday...
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