If you still had any doubt about the validity of Moody’s as a neutral ratings agency, the statement they released today should eliminate that doubt. Moody’s analyst Steven Hess said this
“We would reduce our assessment of event risk if the government changed its
framework for managing government debt to lessen or eliminate that uncertainty”
How convenient is this? As if the Federal Government needed another cheerleader for unbridled spending. Bothered by these inconvenient votes on raising the debt limit? How about just completely eliminating it? In my book, Moody’s has already exposed itself as inept at best and complicit at worst in the run-up of the housing bubble with their bond ratings of the derivatives market. Yet, no one was held to account whatsoever in the role they played in blowing up the housing market.
Now they are actively lobbying for completely unchecked Federal deficit spending. I can’t argue with their assessment that our Federal Government violates our spending limits with regularity. However, a solution which encompasses simply eliminating any threshold whatsoever theoretically to ease bondholder fears is counterproductive and irresponsible.
Here’s the link to the story. Moody’s position doesn’t hold up under scrutiny. On the surface, one may think that bond purchasers would think it a good thing to know there are never any limits to the government purchasing debt. However, no accounting for the risk and costs related to increasing our nation’s debt level will result in even more uncertainty over time. Can you imagine giving Obama a credit card without a spending limit? Would that make you feel more at ease? Of course not.
I’d like to see a real investigative reporter start to dig into the links between Moody’s and the Federal Government. It’s already easy to smell the smoke with this relationship and where there’s smoke, you know what we’ll likely find. It appears to me that Moody’s is just another arm of the Federal Government.