“If you don’t read the newspaper, you are uninformed. If you do read the newspaper, you are misinformed.” -Mark Twain
Matt Damon was captured on camera defending all teachers as angels and our educational system as a modern marvel. When caught in an error and called on it, he became indignant and spit out expletives to defend himself and his mother (who, coincidentally, is a teacher). Never mind the fact that public education in America falls well below the standard in other countries. Never mind the fact that kids that I went to school with managed to graduate despite being damn near illiterate, and it’s only gotten worse since then. Never mind the fact that our public schools churn out violent thugs with an efficency only a prison could admire. And please, never mind that guy doing that horrible rap calling achievement a “crime spree”.
We now have a generation coming up that cannot bother themselves to understand the facts before deciding what they believe – and basing it entirely on their feelings – and our celebrities are defending our educational system as above reproach. It’s almost as if they want things to be this way.
So, naturally, as soon as Standard & Poor’s, the famous credit rating agency, downgraded the US credit rating, the MSM began trumpeting the Democratic Party’s view that the decision to downgrade was a “flawed”, “facts-be-damned” decision based on so-called fuzzy math. It’s easy for the Democrats to say that; they’re going to do what they must to defend their positions. The MSM is practically owned by liberals, so they are going to spit out what Democrats feed them. Then, all of these folks who don’t want to lose precious time learning actual facts will take such claims as gospel, believe them wholeheartedly, and parrot them unfailingly.
Then, when you hit them with facts, they’ll come up with some pretty outrageous stuff – arguments such as, “how come S&P didn’t downgrade the credit rating of all those subprime mortgage beasts but they’re downgrading the country’s credit rating now? They’re hypocrites!”
Here and I was hoping for a real challenge.
The role of a credit rating agency is pretty simple. They assess risk. That’s it. They look at a handful of factors and determine the risk of granting credit to a person, company or government. We all know the three major credit bureaus to be Equifax, Experian and TransUnion, and for the most part we all understand what they do. They take our income into account, look at the debt that we’re paying (including mortgages, rent, car loans, credit cards, etc.), and issue a score that companies use to decide whether or not to issue us a new line of credit falling into one of the aforementioned categories. Companies also use those bureaus to determine a job candidates’ eligibility. If the risk is too great – meaning we’re not making enough money to pay our debt or not paying the debt on time without taking out more debt – our score dwindles and most companies won’t grant any new credit. Experian doesn’t take it upon itself to examine the investments I’m making and whether or not I’m taking a risk there; if they did, my credit rating would be better than it is.
Nor is it the job of larger-scale credit rating agencies to make a determination of the risk of investment being made by a company or a government.
Take a look back at the beginning of subprime mortgage as we knew it. Alan Greenspan went on TV and essentially told the country, everybody, from peons like me to the CEO’s in mansions, that investing in real estate was a flawless move because once people buy a house and move in, they don’t want to move out – ever. It’s a pain, he said, so turn your attention to mortgages.
Banks and other lenders began to look more closely at a very convenient piece of legislation known as the Community Reinvestment Act. In 1977, then-president Jimmy Carter signed into law the act that would make it a crime for any lender of any kind to red-line risky neighborhoods and required those lenders to, in effect, accept a certain percentage of risky lending as a requirement of being in the business. In essence, the government stepped in and guaranteed that people who were not credit-worthy obtained credit anyway, facts be damned. Sound familiar?
Entire companies sprang up to take advantage of a whole new opportunity: subprime lending. It’s an infallible investment, right? Nobody wants to move out of their house. They’ll do whatever they can to keep it. So let’s lend to anyone and everyone because the government has sanctioned it. Oh, even better, once we get these mortgages out there, let’s create a whole new type of security investment based on packages of these mortgages and ignore the credit-worthiness that they’re based on! We’ll be billionaires overnight!
Everyone got on that get-rich-quick scheme just as quickly as they got on the dot-com train. They failed to recognize the exact same indicators of a pending doom that George W. Bush tried to warn Congress of as early as 2003. Bush, while I sincerely disliked his fiscal policies, had few options on what to do. People on BOTH sides of the aisle failed to see what was coming, and as long as everyone was rolling in money, it didn’t matter whether they had an R or a D behind their name – nobody was willing to ruin a good thing. As long as real estate was popular, values were driven up so high they were astronomical. Eventually they could only go one way. Something rising that rapidly will always, without fail, suddenly stop and plummet.
It’s damned easy now to look back and see what was wrong with it. I dare ask how many of these screaming liberals also bought into that scheme only to see the value of their property drop like a rock after cashing out the inflated value of their homes and ending up owing nearly twice what the property was really worth. Everybody was to blame, but not one person has acknowledged the fact that a Republican pointed out the pending doom and a Democrat (Barney Frank) shot him down by waving off the warning as baseless.
S&P, Moody’s and Fitch were not tasked with determining the risk of their investment. Their role was to examine what was on the books of those companies, how much business they were doing, and give them a rating based on the risk of issuing credit to those companies. When there was a hell of a lot of money in it, it was impossible to expect them to downgrade those companies because, at the time, there was little to no risk in issuing that credit.
The federal government, on the other hand, doesn’t have enough money to back themselves up. They are spending too much money and are refusing to cut back – in fact, they’ve only spent more than any of us could have imagined. Democrats want to crucify Bush for the bank bailout, and I disagreed with it, too; we were going to feel the pain of that crash one way or another. They are conveniently forgetting their role in the disaster and are using smoke and mirrors to deflect the blame on everyone but them. They are covering up the fact that by refusing to do something early, they left Bush with few options on how to fix the problem. And now that they are in a position of power, they are holding the economy hostage and blaming the Tea Party with accusations of terroristic hostage-taking.
Unfortunately, no liberal will come close to seeing these realities even if they do read this. Why? Because unless Hollywood can make a realistic movie about economics and make it look sexy, they just won’t be interested enough to educate themselves. So we end up with a generation being fed by Matt Damon and Sean Penn how to stop caring about their own achievement and care more about their feelings – and the rest of the world prepares to eat them alive. It’s more important to stick up for a feel-good ideal and throw money at something than it is to fix it and teach the people involved to make something of themselves that doesn’t include daydreaming of being a movie star and not needing a real education.