Written by Don Washington   

Whenever I hear that up to $2.2 billion of public tax dollars are going to change hands from the public to ANYONE else because of a bond rating change, I immediately have four questions that have not occurred to the Crack Chicago Stenography Corps.

What does it really mean when our bond rating is downgraded? Who gets as much as $2.2 billion dollars? Why are they getting this money? Given the system's past, the behavior of every major actor in the system and lack of honesty and transparency that defines the financial system, is the system being gamed... again in some manifestly illegal manner? That last question might sound paranoid but when one remembers what our financial system sees as normal and even virtuous behavior maybe it's not.

Remember that for them, the masters of finance, engaging in widespread sub-prime mortgage fraud that crashed the economy was not a crime and at this point they've been claiming it was no more avoidable than say a hurricane. They saw fixing interest rates to defraud pensions on a global scale, which is what the LIBOR scandal was just a way to make bonus money. Ratings agencies saw colluding with banks and hedge funds to create AAA ratings for things they had to know were worse than junk which was the heart of the rating agency scam, as business as usual... I mention this since our present predicament is RATING issue. Do not forget that the rating is what is causing our problem and why this is both scary and hilarious will become even more clear to you over the next three days, promise. Finally some of the world's largest and most “respectable” banks acting as money launderers for narcotic dealing mobsters and terrorists while acting as illicit tax havens for plutocratic tax-cheating saw all of the above as a standard business practice. Given all of that, it's hard to discount the possibility $2.2 billion dollars heading into their pockets is just happening without some bending of some rule or out and out raping of some law.

Okay What Does This Bond Rating Downgrading Thing Even Mean?

The Crack Chicago Stenography Corps has not been good on explaining who is downgrading Chicago's bonds or what a downgrade of our bonds actually means. Here is what you have been told. Downgrade bad. Politicians reckless. Pensions must go. Unions to blame too. Sacrifice needed. Hulk Smash. So I'm glad we're here to help.

First of all let's remember that when Moody's, Fitch and S&P make a recommendation it is an opinion like when John Clayton does the NFL Power rankings. Actually, it is way worse than that. The Big Three have quasi-regulatory/legal standing as "Nationally Recognized Statistical Rating Organizations" and that sounds like they should know what they are doing but... well... Okay, the deal is that they have the kind of history that makes the Apple Dumpling Gang look like heavy hitters for the Corleone Family. These people have missed Enron, the entire Mortgage Backed Securities and Collateral Debt Obligations debacles and made a two trillion, (with a “t”) “arithmetic” error when audited by the United States Treasury Department on just ONE portion of a Defense Department budget they were allowed to appraise. So that's who they are but it don't mean nothin' when these people downgrade you, because they “grade” 95% of the market so what they say has throw-weight of a nuclear warhead. And just like a nuclear warhead, even when they are off course they are still incredibly destructive.

So what does it mean when a stock gets downgraded? It means that the borrower, the City of Chicago, us... will be borrowing money from, banks, hedge funds and extremely rich people, at less favorable terms. Could this mean that these people and institutions will stop lending Chicago money? Maybe but not hardly likely because it means that they make more money on the money they lend us. It also means that they, the lenders will be able to write into those agreements ways to make even more money in the future. Remember, this latter detail as we get further into this.

The “Vig” and the Gambling Class

So if you think I'm crazy for telling you that as the city's credit rating gets worse it is very possible that rich people and gambling banks/hedge funds are going to be more, not less likely to buy our debt I can dig it. This sounds GOP Presidential Candidate level of crazy but it's not.

Remember the part about better terms for lenders? Well, last year AFTER Moody's and Fitch cut Chicago's bond rating to Baa1, Wells Fargo pulled in $3.65 billion in orders, at more favorable terms, from dozens of new investors. Do not forget the name Wells Fargo, who is handling the money and making commissions off of bond transactions. They are also possibly betting on our creditworthiness or on the “vig” er.... spread between premiums our bonds trade at relative to whatever benchmark they are set against. What all the above means is that Chicago's shifting and/or shaky credit rating and debt situation is like chum in the water for sharks and the sharks have names... like Wells Fargo.

Tomorrow we talk all about WHO is getting this money from US. This is probably the point where you suddenly realize that for all the screaming and carrying on about the payout you've been subjected to by the Crack Chicago Stenography Corps on this they have yet to really tell you WHERE our money is going... or WHY this is really happening. Mother... See you tomorrow and until then don't hate the game; play the game better.