Who Is Really To Blame For The S&P Downgrade?

Posted by | August 8, 2011 21:19 | Filed under: Top Stories

By Yashwanth Manjunath

The media narrative thus far has placed the blame squarely on the Tea Party for Standard and Poor’s unprecedented decision to strip the United States of its top credit rating, with some even referring to this as the “Tea Party downgrade.” While it is very tempting and easy to point the finger at the Tea Party for this mess, I’d like to place the blame where it really belongs: on Standard and Poor’s and the Wall Street banks they work for.

Any attempt to put all of the blame on the Tea Party for this downgrade, while treating Standard and Poor’s as some sort of neutral arbiter of our nation’s credit-worthiness, is lazy and irresponsible. During the housing bubble Standard and Poor’s, along with the other ratings agencies, played a critical role in the widespread fraud that took place in the secondary financial market by deceiving innocent pension funds into buying Wall Street’s subprime mortgage-backed securities.

They did this by rating what should have been classified as F-rated junk bonds as AAA assets, because they are paid for their ratings by the Wall Street banks and if the banks do not like their rating, they can threaten to stop doing business with the rating agency. Yet after helping Wall Street rob the American middle class of over $7 trillion in assets by giving dishonest ratings purely for profit, we are supposed to treat Standard and Poor’s as an institution with credibility and integrity?

The truth is that Wall Street wanted to flex its muscle against the Tea Party for holding up Obama’s “grand bargain.” The “grand bargain” was even more favorable to Wall Street’s interests than the final debt deal because it cuts entitlements, but the Tea Party held the deal up because of the tax increases in the plan, so Wall Street expressed their displeasure with the Tea Party through the S&P downgrade. When Wall Street gives out orders to Republican politicians they expect those politicians to bow their heads and follow those orders. The Tea Party had the audacity to say no and now they are being falsely blamed for S&P’s unwarranted assault on this nation’s credit-worthiness.

The Tea Party may be totally wrong on just about every single issue, but they are actually motivated by ideology and principle, not just campaign contributions like most of the politicians in both political parties. For that I give them a small amount of credit.

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