You have to hand it to Standard and Poor's. Forget their two-trillion dollar math error. The whole idea that these clowns are evaluating the creditworthiness of the United States is just loony.
For starters, these are the same people who brought us the crisis, by blessing junk sub-prime loans as AAA securities. And they did so because they were paid as consultants by the same financial scoundrels who created the securities.
The executives of the credit rating companies -- not "agencies," for these are private, profit-making, essentially unregulated companies, not public entities -- belong in prison.
They managed to slither out of serious regulation under the Dodd-Frank Act. Their sketchy business models go merrily on, pretty much as before, as if the sub-prime scandal never happened. Rules for the minimal regulation provided by Dodd-Frank have yet to be written.
The last job these thieves deserve is arbiter of the security of Treasury bonds, and markets are even more irrational than they seem if they lend any credence to this downgrade.
The second thing that's suspicious is the timing. If S&P were going to downgrade the government's credit rating, the time to do it was while the Republicans were playing chicken with default. But S&P waited until after Obama was blackmailed into taking an austerity deal to assure that the debt would be honored.
So why do the downgrade now, when payment of the debt has been assured.
Maybe to get Republicans off the hook? The action left Democrats sputtering and Republicans chortling.
Third, S&P has ventured way outside its franchise when it contends that the downgrade reflects political uncertainty. Credit rating agencies were set up to help investors evaluate relatively obscure bonds that are opaque to individual investors. Is Acme Cement a soundly-run company? Does Madison County Iowa collect enough taxes to pay back its municipal bonds? How about Azerbaijan?
But the debt ratio of the U.S. is a matter of public record, and the great game of default- chicken was hidden in plain view. Even so, financial markets are snapping up U.S. Treasury ten-year bonds at the near record low of about 2.4 percent. Do you think investors would lend Uncle Sam their hard-earned money locked in for ten years for a skimpy 2.4 percent return if they thought there was a snowball's chance of default?
So exactly what esoteric insight does Standard and Poors add that the markets don't already know? It beats me.
Their enterprise is so scientific that the three major credit rating companies can't even agree on a rating for the U.S. They should take up astrology.
This sorry tale is part of the larger corruption of private regulation of the world's financial markets. Greece, Italy, Spain, Ireland and Portugal are under assault today in part because large hedge funds are gambling, using essentially unregulated credit default swaps, often "naked" swaps backed by no reserves, betting that these nations will default.
These markets need to be re-regulated, and the European Union and its Central Bank need to refinance these debts at affordable costs.
As for the credit rating companies, they should be denied their quasi-official status, and be put out of business in favor of non-profit or public entities. They would have to be totally transparent in their models, and without conflicts of interest in how they get paid.
We financed a much larger national debt relative to the size of the GDP during World War II. The Federal Reserve and the Treasury cooperated to make sure the bonds got sold at very low interest rates. Americans patriotically bought war bonds, and rich people paid surtaxes as high as 91 percent of their incomes so that some of the costs of war would be tax-financed rather than borrowed.
That is what a seriously governed nation does in a crisis. And there were no meddling credit rating companies to mess it up.
Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is "A Presidency in Peril."