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The Cost of Speaking Truth to Power

DOJ's lawsuit against S&P as a targeted payback for its downgrading the U.S. credit rating in 2011 is entirely consistent with the Obama DOJ's pattern of politically motivated actions.
Scott S. Powell
August 27, 2014
Economics
 Original Article

The editorial “S&P’s New Payback Evidence” (Aug. 16) notes that federal court Judge David Carter has documents supporting Standard & Poor’s defense that it was singled out and politically targeted by the Justice Department in its $5 billion lawsuit alleging wrongdoing in rating mortgage securities that contributed to the 2008 financial crisis. Moody’s and Fitch provided identical ratings on similar mortgage securities but were never charged. Why?

The DOJ’s lawsuit against S&P as a targeted payback for its downgrading the U.S. credit rating in 2011 is entirely consistent with the Obama DOJ’s pattern of politically motivated actions. The lawsuit against S&P was also an effective means to silence and stop Moody’s and Fitch from downgrading U.S. government debt—and thereby save Barack Obama from the historical ignominy of the president who lost America’s triple-A rating and set the stage for the next financial crisis. Interestingly, only a month before the DOJ filed its lawsuit against S&P, the SEC barred lesser known but respected Egan-Jones Ratings Co. from issuing credit reports on government debt. Like S&P, Egan-Jones had the courage to downgrade U.S. government debt—from triple-A to double-A minus—two notches below the S&P downgrade.

S&P should take this opportunity to educate the American public about the financial ratios that prompted a downgrade of U.S. government debt in 2011, the current status of those same ratios and how U.S. debt ratios stack up against other triple-A rated countries. Bond-rating agencies should be walled off from politics so as to ensure objective analysis on risk factors that politicians would prefer to hide or ignore.

Scott S. Powell
Discovery Institute
Seattle

Scott S. Powell

Senior Fellow, Center on Wealth and Poverty
Scott Powell has worked in the corporate, academic, and research worlds. He has taught at two universities, served on two corporate boards, and been an entrepreneur—founding two companies. He has been Senior Fellow at the  Discovery Institute since 2012, after a six-year affiliation with Stanford University’s Hoover Institution. He has written three books and over 350 published articles in the Wall Street Journal, Investor’s Business Daily, Newsmax, The Federalist ,USA Today, Barron’s Financial, New York Post, Chicago Tribune, The Houston Chronicle, and some 50 other newspapers and journals in the U.S., Europe, and Asia. He delivered the valedictory address at his graduation from the University of Chicago with honors (B.A. and M.A.) and received his Ph.D. in economics from Boston University.