The ongoing negotiations in Congress over raising the U.S. debt ceiling have prompted Moody’s Corp, a bond rating agency, to bring the rating of U.S. Treasury bonds up for review, according to an article from Bloomberg News.
U.S. Treasury bonds are currently rated “AAA”, the highest possible rating, and are considered some of the safest investments available. If congress fails to raise the debt ceiling, the U.S. government would run the risk of defaulting on its debt for the first time in history, and bond rating agencies would likely lower the bond rating, making them less attractive investments and reducing the government’s ability to borrow money.
Representative Peter Welch said in an interview with Bloomberg that Moody’s is “sending a signal” to lawmakers with its warning on the bond rating. Moody’s, along with the other companies mentioned in the article, have other methods of “sending signals” to congress as well. Below is a look at the influence profiles of the entities mentioned in the piece:
- Moody’s spent $2.77 million on lobbying from 2009 to 2010 and $250,000 so far in 2011, 47 percent of all lobbying spending since 1991.
- Standard & Poor’s spent $60,000 on lobbying from 2009-10. McGraw Hill, Standard & Poor’s parent company, spent $3.09 million on lobbying in 2009-10 on some of the same bills and issues.
- Both Standard & Poor’s and McGraw Hill’s lobbyists registered to lobby on issues surrounding credit rating agencies, including a provision in Dodd-Frank that would hold credit ratings agencies liable for securities fraud. A bill was introduced by Rep. Steve Stivers (R-Ohio), H.R. 1539, to repeal that provision.
- Moody’s lobbying disclosure forms only say they are lobbying for “Financial market regulation”.
- Fannie Mae only made $43,753 in political contributions in 2009-2010. That amount is far less than the $1 million in contributions made in 2007-2008, the years the financial crisis began and just as banks began to fail.
- Likewise, Freddie Mac only made $44,400 in contributions in 2009-2010, while in 2007-2008 the organization made just over $443,000 in political contributions.
According to the Bloomberg article, Moody’s would downgrade U.S. bonds to AA, the rating just below AAA. Other ratings agencies are prepared to take more drastic measures, such as Standard & Poors, who warned the government on June 30th that it would drop its rating from AAA to D, the lowest possible rating.
Credit ratings agencies became the subject of regulation following the financial crisis in 2008, because credit ratings agencies like Moody’s and Standard & Poor’s rated financial instruments based on bad home loans as AAA, and many of them turned out to be much riskier than the rating implied.
‘Influence Explored’ takes an article from the day’s headlines and exposes the influential ways of entities mentioned in the article. Names and corporations are run through Sunlight’s influence tracking tools such as Influence Explorer and Transparency Data to remind readers of the money that powers Washington.