If anyone is a fan of the book or movie The Big Short, one has to remember the scene where Mark Baum confronts the S&P ratings specialist and basically unloads on their fraudulent methodology:
In today’s news from the collapsing Chinese giant Evergrande, S&P 500 re-enters the news just like they did during America’s real estate bond Ponzi collapse (via Reuters):
Without going into any details from the story, as it is a short read, remember this one factoid from the circus the ratings agencies engaged in during the American financial crisis:
If the ratings agencies are cutting companies to CCC or further into junk, the default has probably already happened.
The ratings agencies were never reformed and no legal action was ever taken against them for the actions despite promises from presidential candidate Obama. In fact in 2009-2010 when reforms were being screamed for, the Dodd-Frank act basically codified their fraud and has enabled them to continue rating the CDO’s, CLO’s, etc. just like they were in 2007 but burying them in the dark markets away from the public’s eyes.
In the end, when the American economic collapse occurs almost parallel to China’s, the ratings agencies will receive some scrutiny for the activity happening in the junk and secondary dark bond markets but again with zero consequences.
As long as the Godfather Jay Powell and his bankster family members of the Federal Reserve are allowed to run the economy as they see fit, America’s Ponzi economy will continue to be managed like a mafia crime family; with little risk of reform, arrest, or punishment.