Friday, August 5, 2011

Why Do Standard & Poor's and Moody's and Fitch Lobby the U.S. Congress??

A Series EE $100 U. S. Bond

Robert Kennedy, Jr. said that business controlled by government is called communism, and government controlled by business is called fascism. Now with today's downgrade of U.S. Bonds by Standard & Poor's there is something foul-smelling in the international, vastly powerful, government controlling bond rating business.

If we judge from the money paid Washington lobbyists by the big three bond rating agencies, we may already have a proper fascist state.

Standard & Poor's in 2011 has now spent through it's parent McGraw Hill Companies over US$ 600,000. Last year, 2010, they spent over US$ 1,700,000. That's just one company. All three had their own operations for this and they have been at it for years and years. It just seems a little intensified over the last two years in election and seating of the 112th Congress.

Finding the exact amount is difficult because lobbyist expenditures through the parent company may be for other purposes than enhancing the position of Standard & Poor's as a ratings agency. But it is on the record that Douglas Nappi and his cohorts of the Washington, DC firm Nappi and Hoppe, LLC. approached various members of congress and federal agencies to lobby for Standard & Poors. The records are the Lobbying Reports that must be filed with the U.S. House and the U.S. Senate by the Lobbying Disclosure Act of 1995.

The Standard & Poor's lobbyists spoke to Senators and Representatives and committee members and people at agencies to ask for something. What they asked for exactly, we do not know. The forms do not tell us that.

On the form filed by Nappi and Hoppe, LLC. the firm was hired by McGraw Hill for Standard & Poors to represent Standard & Poor's interests before the following:
"Implementation of Title IX. subtitle C of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and Congressional oversight activities related thereto. Plus the regulation of Nationally Recognized Statistical Rating Organizations. Plus the rating of sovereign, municipal, corporate and structured debt."  And their lobbyist contacted the following: "The U.S. House of Representatives, the U.S. Senate, the Securities & Exchange Commission (SEC), the Federal Reserve System (The Fed), and the Federal Deposit Insurance Commission (FDIC)."

It is very important to note that last month, the House Oversight Committee with Rep. Darrell Issa in the chair relentlessly grilled Professor Elizabeth Warren in a transparent attempt to discredit the new Consumer Financial Protection Agency. Unbelievably Issa could not pose a single question that was not whispered into his ear from a more rehearsed assistant. It is a given that Issa's lackey had just come from a meeting with the Standard & Poor's lobbyist. This stuff does work that way and most people don't quite realize the subtle and potent influence wielded by the lobbyist in Washington. It is a big money game. And money talks loudest in Washington.

Now let's look at the other two. Moody's hired the huge and venerable firm Akin, Gump Et Al as their spin masters. Moody's spent US$ 1,530,000 in 2010 and so far in 2011 they pushed the ante to US$ 610,000. Moody's is a publicly traded United States corporation so it's major owners by far are American institutions like mutual funds and retirement funds. The same for McGraw Hill. Not so for our third party, Fitch Ratings. Fitch is owned by FIMALAC a giant Parisian, publicly traded company whose CEO is the biggest owner, Financiére Marc de Lacharriére. Note the initials from M. Lacharriére. So this year Fitch paid the KSCW Inc. lobby firm US$ 120,000 and another US$ 100,000 to another firm Crossroads Strategies. In 2010 Fitch paid out US$ 440,000 to the same firms.

So total expenditures for lobbying operations for all three of our rating companies in 2010 and 2011 to date, equals US$ 5,200,000. That's a lot of money to invest in a person to whisper in the ear of congress people and their aides and the heads of agencies and their helpers. There must be something at work here to get the money back for these companies. But how?

One simple way could be this: What if Fitch and Standard & Poor's and Moody's each short sold U.S. markets betting on the fall in the past three weeks? Then they easily could have made their money back a hundred fold. What does all this smell like? It smells rotten. It is rotten to the core of our federal government.

Please note that some of the data used in this post was derived from