Standard & Poor’s, the self-righteous credit-rating agency, has a damn lot of nerve. It provoked scary headlines by solemnly threatening to “short” America by downgrading the credit-worthiness of U.S. Treasury bonds unless Congress and the President oblige creditors by punishing the citizenry with severe budget cuts. 


The headline I would like to see is this: “S&P execs face major fraud investigation, take the Fifth before federal grand jury.”


News coverage on S&P’s credit warning typically failed to mention: Standard & Poor’s itself is in utter disrepute. It was an unindicted co-conspirator in the Wall Street deceitfulness that brought the nation to financial ruin. During the bubble of inflated housing prices, S&P blessed the fraud-based mortgage securities issued by Wall Street banks with AAA ratings – deceiving gullible investors around the world and assuring bloated profits and bonuses for greedy bankers. S&P provided cover for the massive scam that sank the national economy. 


S&P WAS AN UNINDICTED CO-CONSPIRATOR IN WALL STREET DECEITFULNESS.


That story line is the essential reason federal deficits soared in the age of Obama. National wealth was destroyed, government tax revenues collapsed, the feds spent trillions bailing out the imperiled financial system. In short, the bankers did it, abetted by see-no-evil accomplices like Standard & Poor’s. 


The real explanation for the deficits has been air-brushed. Instead, we are witnessing another brazen scam engineered by the financial establishment – a phony political analysis that blames the victims, Americans at large who lost jobs, homes, savings and security thanks to Wall Street titans. The fiscal problem, we are told by right-handed commentary, should be blamed on big government, not big bankers. People must now learn to curb their appetites. Brave politicians in both parties claim they must cut health care and Social Security and other important guarantees in order to save the country from wrathful judgment by Standard & Poor’s. What a hoot.


The dereliction of Standard & Poor was spelled out in detail by the blistering report recently issued by the Senate Permanent Subcommittee on Investigations, chaired by Sen. Carl Levin (D-Mich.). Levin’s hearings last year established why the supposedly disinterested analysts at S&P handed out inflated ratings for toxic assets. They did it for the money, as witnesses acknowledged. The rating agencies are paid by the banks to do their ratings. If they refuse to stamp newly issued securities with AAA labels, the bank will take its business elsewhere. 


This is an outrageous conflict of interest at the very heart of the financial system. Congress should have had the nerve to outlaw the practice in unambivalent terms. Instead, Congress turned the question over to federal regulatory agencies and asked them to devise a remedy. But the regulators were also among the see-no-evil accomplices that led to the crash. Senator Levin’s final report includes six recommendations urging the regulatory agencies to get tough with the inflated credit ratings, but don’t hold your breath. What’s required is a serious law that either changes the status of the rating agencies or shuts them down. Otherwise, the temptations for more deception and false assurances will be too strong to resist.


The deficit panic is itself bogus – poor-mouthing America to avoid raising taxes on the folks who got the money. Barack Obama promises to do the blood-letting more delicately than barbaric Republicans, protecting Social Security and Medicare and other much-loved programs. But can people believe him? 


They have been burned before by vague good talk. 


Veteran political journalist William Greider is national affairs correspondent for The Nation and author of Secrets of the Temple and most recently, Come Home, America.