Moody's, the big credit rating agency, recently had this comment on California Governor Jerry Brown's May budget revision.
"In prior years, the state has frequently used overly optimistic revenue projections in its budget, resulting in mid-year budgetary shortfalls that needed to be solved using triggered spending cuts of mid-year legislated spending cuts."
Well, we certainly wouldn't want to make overly optimistic projections that lead to financial shortfalls and painful budget cuts, would we Moody's? I mean, that would be irresponsible.
Mr. Pot, meet Mr. Kettle.
After all, Moody's starred in the tragi-comedy that led to the nation's near financial collapse and economic disaster for millions of ordinary Americans when it told its high-paying customers in the big banks that their risky subprime mortgage loans, bundled into opaque bonds, were solid, reliable investments. Moody's was completely wrong, of course. When the housing bubble burst and those investments turned toxic people lost their jobs and California got a nightmare of budget contraction. Today, millions of Californians are still suffering from the cuts in education, health care and many other vital services at least partly enabled by Moody's incompetence.
It takes a certain chutzpah to wag a finger of financial accountability after the epic failure of Moody's, its fellow credit rating agencies and their one-percent clients, to meet minimal accountability standards. But we're in an era where elites are not accountable for any of their mistakes. Pundits who get it wrong are still read. Politicians whose policies fail and forecasts are false still hold office.
Moody's was wrong and its clients got billions in bailout money. Meanwhile, average homeowners must defend themselves against the banks that sold them risky home loans.
California has no choice but to rely on Moody's and others to rate the bonds it must sell to finance government these days. But next time Moody's warns of overly sunny projections that could bring financial gaps that lead to budget cuts, the governor and state legislature should give the advice all the weight it deserves.
With a Perspective, I'm Seth Sandronsky.
Seth Sandronsky is a freelance journalist who lives in Sacramento.