There are many aspects of the debt ceiling talks that are untoward. The political posturing. The lack of compromise. The somewhat terrifying reality that the U.S. might not be able to pay its bills.
But one part of the whole affair is really irritating: the righteous indignation of the rating agencies.
On Thursday S&P warned that there was a 50/50 chance it could cut the U.S. credit rating if debt ceiling talks between the White House and Republicans remain at an impasse. Also this week, Moody’s fired off a similar warning to the U.S. Put your fiscal house in order, or get a downgrade.
OK, which analogy best applies to these announcements? Are the rating agencies like the religious leaders who preach about against sin, and then enjoy various vices in their free time? Or are they cops who break the law? Or maybe they are fast food operators who offer crap to their customers, but then blame anybody but themselves for the obesity epidemic.
Whatever: it’s just a bit painful to see the high-and-mighty rating agencies scolding the U.S., and holding all the cards, when they helped create this mess in the first place. Remember, the economy exploded when subprime mortgage debt defaulted. Those loans attracted investors in the first place because rating agencies gave them perfect, AAA scores. The rating agencies were either hopelessly stupid at best, or outright fraudulent at worst; the same banks who pushed out this junk were paying the rating agencies for these rosy reviews.
Yes, at the crucial juncture America needs a strict parent to make the kids go into their room and work something out. It would just be nice if that parent were a role model. S&P and Moody’s are far from it.