“I’m calling all the shots tonight
I’m like a loaded gun.”
I’ve figured out who is really running state government. It’s not elected officials such as the governor.
It is the people who decide what the state’s credit rating will be.
Decisions that affect future generations are made by unknown financial analysts. If the state has a low credit rating, it has to pay a higher interest rate to borrow money.
It is the same process people go through to get a mortgage, except that a lot more money is involved.
Politicians pay homage to the great credit rating gods, but few people really know about credit ratings or what goes into them.
Projects and programs are added or cut depending on the mood of the credit rating companies. In this way, the conservative policies of the rating companies actually impose a form of fiscal discipline upon elected officials.
I don’t mind having a watchdog on politicians, but that watchdog should be the voters, not nameless and faceless corporations.
I don’t think the average person understands the impact that credit markets have upon their lives. Not all politicians get it either.
The muscle flexing of credit markets is not limited to the state government. It affects every aspect of business and government.
I learned in high school that the chairman of the Federal Reserve Board was more powerful than any president. Fed chairs can cause stock market crashes by coughing or blinking.
Before giving a person that much power, you would think that the United States Senate would want to know every detail of a potential Federal Reserve chairman’s background, thoughts, ideas and actions.
It doesn’t happen that way.
When the current chair Bernanke, or the previous chair Greenspan visit Congress, senators fawn and grovel. No one asks tough questions. I kept waiting for a senator to offer to wash Greenspan’s car or cut his lawn.
The only exception to this Federal Reserve love fest is Kentucky’s Sen. Jim Bunning.
Bunning and I disagree on many issues, but he gets my respect when a Federal Reserve chair shows up in front of the Senate. He is the only senator who asks tough questions and the only senator who seems to understand that these guys can ruin our lives.
Some magazine called Bunning one of the five worst senators. I did not read the article, but I bet he was beaten out by someone who ignored the Federal Reserve, but gave deep scrutiny to the stain on Monica Lewinsky’s dress.
Over and over, I hear politicians reference something that a rating company had supposedly said.
Gov. Ernie Fletcher vetoed a number of projects and cited credit ratings. Speaker of the House Jody Richards had his own spin on what the companies would say.
Rarely do you see anyone from the credit rating companies interviewed by the media, and yet journalists take politicians’ interpretation of the credit gods as gospel.
In reality, it is easier to take the politicians’ word. Credit markets are complicated. They are difficult to explain in a 400-word article and impossible in a 20-second sound bite.
If the public understood that some unknown entities really call the shots, they might want politicians and media to watch them more closely.
Because politicians seem to spend their time sucking up to the credit rating companies, we could skip elections and just let the companies run things. With all the money we would save, it would really improve our credit rating.
Bonding companies don’t give contributors big contracts or find jobs for their idiot brother-in-laws.
I know several people at rating companies. They seem like intelligent and honest people. If they screw up and a highly rated company like Enron goes bankrupt, it is egg on their face. It is simpler for them to be cautious.
Because elected officials keep talking about the influence of credit ratings, either the people issuing credit ratings are really running things or they’re being used by politicians as an excuse.
Either way, the companies are perceived to be calling the shots.
Maybe we should call them and find out.
Don McNay is president of McNay Settlement Group, where our clients call the shots. You can write to him at email@example.com or read what he has written at www.donmcnay.com. His award-winning column is syndicated on the CNHI News Service.
“I’m calling all the shots tonight
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