'Too Big To Fail' Citibank CEO takes over S&P

The head of S&P is stepping down and is being replaced by the CEO of Citibank.  Do you mean to tell us that the only person qualified comes from one of the 'too big to fail' banks?  Why is anyone 'too big to fail'?  With those words their success in recent years is based on bailouts by the Federal Government which translates to our tax dollars at work.  The Feds prop up the banks so the rich get richer and the taxpayer gets the short end of the stick again.  If you try to save, you get paid next to nothing thanks to the Fed policy.

Now one of of those 'too big to fail' bank CEO's is going to take over the S&P rating system.  When is this going to all end so we get back to a normal business climate where the 'too big to fail' banks are split up and allowed to survive on their own merit not government bailouts?  

Musical chairs
by Russ Roberts on August 23, 2011 

From a WSJ alert: 

Standard & Poor’s President Deven Sharma is leaving the credit-rating firm at the end of the year, according to a person familiar with the matter. 

The credit-rating firm plans to announce Mr. Sharma’s exit on Tuesday before the markets open. Douglas Peterson, chief operating officer of Citigroup Inc.’s Citibank unit, will succeed Mr. Sharma on Sept. 12. Mr. Sharma will remain at S&P through the end of the year in an advisory capacity. 

According to his Citi bio, Peterson has been with Citigroup for 25 years. Citibank has been a huge beneficiary of government largesse (#2 recipient of emergency lending from the Fed–over $100 BILLION) as well as an eager participant in the affordable housing game in the 1990′s and early 2000′s. They are not a particularly healthy institution. Nor have they given any sign of understanding risk in the traditional sense. Given the help they’ve received from Washington, maybe their executives understand it all too well. 

I have tried a number of different additional sentences to summarize my thoughts but I keep crossing them out. The main thing to realize is that both Citibank and S&P have little to do with capitalism and everything to do with crony capitalism. This is a game of financial musical chairs where the government keeps the market from calling the tune. The cronies call the tune. 

I should add one more thing. People talk as if S&P and Fitch and Moody’s are independent private organizations. They are, sort of. But the structure of regulation empowers them. Without the regulations requiring their imprimature, I’d assume they’d be gone. Without the implicit support of the regulatory apparatus, why are any of the ratings agencies in business?

COMMENT on the POST:  

The SEC empowers them to be ratings agencies. The SEC and and the Fed allow only these triplet’s ratings to count for reserve requirements, counterparty assessments (AAA institutions deal only with other AAA institutions), etc. Thus, no rating agency can compete with them.
The triplets are not private in any meaningful sense. They are protected from competition and when they misrate MBS and CDO, as they did in the last decade, there are no consequences. There would be if they were truly private rating agencies in a competitive market. 

Regulating agencies provide cover for the large, politically connected firms at the expense of firms that are not large and politically connected. It is the regulator that creates Too Big To Fails, not the market. Once they are safely ensconced in the regulated fortress, protected from meaningful competition, they play their own game of fraud and incessant gambling. They’re safe from failure. can command transfers of wealth from you to them. 

All of that comes courtesy of government. 

Source:  Cafe Hayek

Downgrade turns up heat on Congress which is a good thing

Will someone please explain to me why Obama went out fundraising and partying to his huge birthday extravaganza in Chicago with the S&P set to downgrade the US credit rating from AAA to AA? 

Why did the Senate adjourn?  When your work is not finished, you certainly don't take a vacation.  The Senate has not passed a budget in over two years so they should have taken no vacation and be in daily sessions to finish the job of passing a budget so the two budgets could go to Conference Committee.  The House has passed a budget and has their affairs in order.   In fact the House has passed bill after bill dealing with the budget and economy that the Senate tabled so they wouldn't have to take a vote.

Do the Democrats plan on passing no budget in 2012 as well which would mean four years of the Senate passing NO budgets and relying on continuing resolutions to keep Government functioning?  If that is not a campaign issue, nothing is.  What a worthless bunch of Democrats in the United State Senate who put politics over what is good for America.  Looks like Reid is still taking orders from Obama to do nothing that might hurt his campaign.

While the Senate leadership has continued to play political games with House passed bills including a budget bill, our credit rating has been downgraded due to lack of action of getting the deficit under control.  The House had made deficit a reduction a priority while Obama and the Democrats continue to look for more ways to spend money including a second stimulus when the first one failed miserably.  

Unless the Democrats in the Senate and Obama get serious about deficit reduction, we could see another downgrade.  As I heard someone on Neil Cavuto this morning say, Obama will be known for the first President to allow a downgrade of credit of the United States not the first black President.  While the fires have been burning in DC with partisan bickering and stubbornness out of the Senate Democrats to cuts, Obama has been out raising money for his reelection. 

The goal of Obama is to raise $1B to run his campaign and he doesn't even have a primary opponent.   That seems to be more of a priority to Obama then getting the financial house of the United States in order.  Is he doing this on purpose to tank the United States to help his overseas buddies in the Arab World bring the United States to its knees?   The other option that comes to mind is that he doesn't care what happens as long as he can fly around the Country on AF One waving his magic wand to raise more dollars for his campaign and grace the little people with his presence. 

One thing is certain, Obama has not had the best interests of the Unites States at heart since he took office and it has not changed except to get worse.  All he cares about is raising money for HIS campaign and be on the campaign trail using the resources of the US taxpayer.  No incumbent President without an opponent would be out raising money and campaigning this early especially when the Federal Government is facing such a financial crisis but Obama is not like other Presidents as we have witnessed.  His agenda to move the Country way left toward socialism has not worked but he has tanked our economy big time in the process. 

Time to send him to the Unemployment line in November 2012.

Downgrade turns up heat on Congress

By Charles Riley @CNNMoney

August 5, 2011: 11:39 PM ET

NEW YORK (CNNMoney) -- The downgrade of the United States' AAA credit rating will apply even greater pressure on Congress to follow through on plans to tame the nation's debt.

Over the next few months, Washington is set to engage in a series of battles over the fiscal course of the federal government.

And that debate will largely be carried out through a new bipartisan "super committee." The 12-member panel -- six Democrats and six Republicans -- will have until Nov. 23 to propose how to cut between $1.2 trillion and $1.5 trillion in deficits.

Congress will then take an up-or-down vote on the proposals by Dec. 23.

In its downgrade announcement on Friday, credit rating agency S&P said it could "stabilize" the country's rating if the committee's work helps lead to debt-reduction measures "beyond the minimum mandated."

The committee was established by the debt ceiling deal signed by President Obama this week. The law put caps in place on domestic and defense spending, resulting in cuts of $917 billion over 10 years.

What's wrong with the debt ceiling deal


Members will be tasked with finding ways to cut the deficit while navigating tough issues that have festered in Washington for decades: taxes, along with cuts to entitlements, defense and discretionary spending.

The members of the committee will face intense pressure from lobbyists and special interest groups, as well as their fellow lawmakers -- who have to run reelection campaigns and want their views represented.

A dispute has, of course, already erupted over whether the committee will tackle taxes, and which baseline should be used to measure cuts.

While the committee -- once appointed -- faces a series of tough choices, they also have a powerful incentive to finish their work on time, and on budget.

The committee's goal is to cut at least $1.5 trillion in debt. If it fails to do that or deadlocks, the sword of Damocles will fall on most forms of spending in the federal budget.

Specifically, as much as $1.2 trillion in across-the-board cuts would kick in -- evenly divided between defense and non-defense spending.

The battle over 2012: The super committee won't be the only budget game in town. Lawmakers will also have to decide on agency spending levels for fiscal year 2012, which starts Oct. 1.

As part of the debt ceiling deal, Congress decided to cut spending for the year, but not which programs and agencies will receive less money.

The deadline for making those tough choices is just around the corner.

Excerpt:  Read More at CNN Money