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Actually, Fahner did say he met with the bond raters

Wednesday, Jul 24, 2013

* Yesterday, I told you that Civic Committee honcho Ty Fahner said some members of the Civic Committee, but not him, met with bond rating agencies to put pressure on them to lower Illinois’ credit rating

“The Civic Committee, not me, but some of the people that make up the Civic Committee… did meet with and call - in one case in person - and a couple of calls to Moody’s and Fitch and Standard & Poors, and say ‘How in the hell can you guys do this? You are an enabler to let the state continue. You keep threatening more and more and more.’”

* But after prompting from a reader, I listened to Fahner’s comments yet again. The actual quote is this…

“The Civic Committee, not me, but me and some of the people that make up the Civic Committee…”

Listen for yourself by clicking here. Fahner’s comment comes at the 47:35 mark.

It seems contradictory. “Not me, but me and…” So, maybe we need a legislative hearing to clear up this matter.

- Posted by Rich Miller        


27 Comments
  1. - Chefjeff - Wednesday, Jul 24, 13 @ 10:49 am:

    I wonder how many of our Civic Clubbers were short Illinois bonds?


  2. - Obama's Puppy - Wednesday, Jul 24, 13 @ 10:55 am:

    It would be interesting to see if he made comments supporting Squeezy the pension python, since he was in essence lobbying for a bigger squeeze on those services that he is soooo concerned about (sarcasm added).


  3. - Formerly Known As... - Wednesday, Jul 24, 13 @ 10:56 am:

    It’s one thing if he was simply exercising his right to free speech, same as every other citizen, legislator and resident of this state.

    Bond raters evaluate information and opinion from multiple sources, and there is nothing wrong with expressing your opinion or sharing that information if it is what you truly believe.

    It is quite another if you are actively attempting to manipulate bond ratings in the interest of personal financial benefit.

    It would be stunning to learn it was the latter, especially since there is nothing to base such allegations upon other than specualtion and inneundo.


  4. - The Captain - Wednesday, Jul 24, 13 @ 11:07 am:

    When anarchists use sabotage as a political strategy they cause tens of thousands of dollars worth of damage and we prosecute them to the full extent of the law.

    The Civic Committee tried to sabotage the Illinois bond ratings as a political strategy and any negative influence probably caused millions of dollars worth of damage. They should be pursued and prosecuted with the same intensity we apply to purple-haired punk rockers.

    Using sabotage as a political strategy causes financial harm that the taxpayers have to bear and the rules should apply equally to all.


  5. - Demoralized - Wednesday, Jul 24, 13 @ 11:14 am:

    ==Bond raters evaluate information and opinion from multiple sources==

    If the rating agencies are taking into account what the Civic Committee says then I have even less confidence in them than I do now. The opinion of the Civic Committee should have absolutely NO relevance in the rating agency’s determinations.


  6. - Elo Kiddies - Wednesday, Jul 24, 13 @ 11:21 am:

    Spoken communication is sometimes imprecise. Maybe what he meant was “not (just) me, but me and…”?


  7. - carbaby - Wednesday, Jul 24, 13 @ 11:35 am:

    I think he meant “not me personally” but as representing the Civic Club with others. I find that ironic, if true, because he, in fact, creates/sets the agenda for the group.


  8. - Yossarian Lives - Wednesday, Jul 24, 13 @ 11:38 am:

    I don’t think we need a legislative hearing to figure out whether Ty Fahner in particular was there or not. But I think there probably should be some sort of investigation into this attempt to influence ratings agencies to downgrade Illinois.

    Sure, it’s free speech. But Moody’s isn’t a government body subject to the Open Meetings Act. They don’t go on listening tours. I have trouble believing that if I were to call their 800 number and tell them what I think about Illinois’ finances, I’d be taken as seriously as emissaries from the Civic Committee. This idea that the ratings agencies are taking everyone’s opinions into account as they make their decisions is utter baloney. Legal or not, Fahner and/or Company should never have made the call, and the ratings houses never should have taken the call. Period, end of story.


  9. - CircularFiringSquad - Wednesday, Jul 24, 13 @ 11:42 am:

    We are guessing no one would listen to Ty on his own, but millionaire corporate honchos who pay Moody’s et al big fees to rate their notes and bonds, etc would get a little listen. Especially in the era following the fine handiwork of Moody’s et al that led to the trashing on the world economy by rating junk housing bonds Triple A. Fine work Civic Committee!


  10. - tired of it all - Wednesday, Jul 24, 13 @ 11:42 am:

    Absent solid evidence that he has a financial stake in bond ratings, Fahner has the right to say whatever he wants to say to bond rating agencies. While it may not be criminal, it is certainly despicable.


  11. - Loop Lady - Wednesday, Jul 24, 13 @ 11:53 am:

    I agree with Rich..lets hear who said what to whom…
    This is a public matter…


  12. - Judgment Day - Wednesday, Jul 24, 13 @ 11:54 am:

    “The Civic Committee tried to sabotage the Illinois bond ratings as a political strategy and any negative influence probably caused millions of dollars worth of damage. They should be pursued and prosecuted with the same intensity we apply to purple-haired punk rockers.”

    Good luck with that.

    Actually, they (Civic Committee) have a really nice defense to their actions. They can simply present that they learned what can happen when there is no ‘citizen feedback’ to the rating agencies on credit rating activities. See 2005-2007 time period on Mortgage Backed Securities [MBS] where ridiculous AAA ratings were giving to bonded securities which looking back, wouldn’t even qualify as being hot garbage.

    They (Civic Committee) were just presenting their views on the quality of today’s credit ratings of state government(s) - Citizen input. They have that right to do so.

    IMO, this Illinois credit rating discussion is just a far more elegant version of the entire Herbalife food fight (Carl Ichan vrs. Bill Ackman).

    You seem to think they should be prosecuted. Under what provisions? Realize, you might actually be doing them a giant favor if those actions started. Right now, the Civic Committee has very limited influence within the process. They’re not ‘inside’, they’re on the outside shouting (making noise). But in a court (legal) environment (and it’s most likely to move into federal court), it’s a different ballgame. It’s going to be more about ‘facts’ and ‘discovery’ and all that other stuff which will come to light. You really want to go there?

    The real question that’s the ‘Elephant in the room’ that’s now coming forward and going to be litigated is about there being a difference in legal standing between ‘Pension’ and ‘Pension Related’ bonded indebtedness vrs. General Obligation (Non Pension) bonded indebtedness. That’s going to be a beauty.


  13. - Arthur Andersen - Wednesday, Jul 24, 13 @ 12:06 pm:

    Alternatively, perhaps Ty was blowing his own horn a little louder than usual and decided to take credit, so to speak, for something over which he and his cronies had no influence.

    Playing to the crowd, and all that.

    A public hearing would be a good way to clear that up.


  14. - angelo mysterioso - Wednesday, Jul 24, 13 @ 12:10 pm:

    It’s not free speech when the Civic Committee tries to influence ratings. That’s confusing liberty with license (see Blago). People can profit from a downgrading and that’s why an investigation into a correlation between the downgrading, their possible influence, and investment profits realized by individual CC members from it would be interesting. If found to be true, IMHO, that’s called racketeering.


  15. - Hyperbolic Chamber - Wednesday, Jul 24, 13 @ 12:12 pm:

    @ Yossarian -

    What’s your problem with Civic Committeers flipping through their rolodex (or the country club membership list) and calling their buddies at Moody’s, et al? As you noted, you could do the same, they just won’t listen. Does that make your situation a… Catch-22? (wink, nod).


  16. - 47th Ward - Wednesday, Jul 24, 13 @ 12:14 pm:

    Some pigs are more equal than others.


  17. - Hyperbolic Chamber - Wednesday, Jul 24, 13 @ 12:20 pm:

    Blue collars good. White collars better.


  18. - Formerly Known As... - Wednesday, Jul 24, 13 @ 12:24 pm:

    @Demoralized - excellent point.

    It really makes you wonder what’s going through (or not going through) the minds of these rating agencies.

    We all saw how well their ratings on mortgage backed securities, etc. worked out.


  19. - hisgirlfriday - Wednesday, Jul 24, 13 @ 12:28 pm:

    If you read the book “The Big Short” you get the impression that what is of most concern of the people working at the ratings agencies is doing what the big banks/hedge funds what them to do so they can be hired by them and make more money there than at the ratings agency.


  20. - Judgment Day - Wednesday, Jul 24, 13 @ 12:29 pm:

    “People can profit from a downgrading and that’s why an investigation into a correlation between the downgrading, their possible influence, and investment profits realized by individual CC members from it would be interesting. If found to be true, IMHO, that’s called racketeering.”

    Last time I checked, it’s in the area of responsibility of the SEC (Securities and Exchange Commission). Go for it.

    Don’t be too surprised if they’re not real interested.


  21. - foster brooks - Wednesday, Jul 24, 13 @ 12:48 pm:

    This punches holes in madigans police powers theory.


  22. - lakecounty - Wednesday, Jul 24, 13 @ 1:06 pm:

    The Civic Committee should be ashamed of themselves for engaging in activities that hurt the taxpayers of Illinois, perhaps to the enrichment of themselves. A large majority of the Committee members represent financial related entities, so I would not want to comment on cause and effect, but the correlation seems suspect. I think the members of the Civic Committee should repay Illinois the extra interest and other costs such as insurance that their personal attention caused…. and change the name of the Committee.


  23. - Joe M - Wednesday, Jul 24, 13 @ 1:12 pm:

    I wonder why the Civic Committee of the Commercial Club of Chicago has such an interest in Illinois pensions. They have done everything from trying influence the bond rating houses, and introducing legislation in the General Assembly (in April, 2011, Tom Cross publicly stated, “Along with the Civic Committee of the Commercial Club of Chicago I am sponsoring Illinois House Bill 149,….”

    Is it because they fear that the alternative if these pension bills fail will be to force Illinois to go to a progressive state income tax structure to pay its financial obligations? Any other theories?


  24. - JC - Wednesday, Jul 24, 13 @ 1:17 pm:

    The Civic Committee has very limited influence (in the process)? Why do we hear anything from them then? Why is Ty’s opinion about the pension issue of any significance then? At the outset of legislative meetings on pensions, an uninformed person might have thought he was the pension fix guru–the absolute expert on how it should be handled. We sure heard his name and saw him on TV often enough. Why is he included in any meeting? Influence? No influence? He’s certainly been quieter lately. Wonder why.


  25. - Frenchie Mendoza - Wednesday, Jul 24, 13 @ 1:32 pm:

    ======
    Is it because they fear that the alternative if these pension bills fail will be to force Illinois to go to a progressive state income tax structure to pay its financial obligations? Any other theories?
    =======

    I don’t think it’s a theory. I mean, it’s what they’re doing. It’s clear as mud. They’re using a pension “fix” as a way to steer discussion away from the progressive tax. The result of the pension fix — and failure of any and all progressive tax rumbles — means they (the Civic Committee) protect their own taxes.

    Essentially, a small 1% is making money off the 99%.

    Their lobbying the ratings agencies means everybody is focused on everything *but* tax rates. Is it illegal? Probably not.

    Despicable? Yep.

    Unethical? Probably a gray area, although I’m sure most folks would understand that there’s no way to spin it as a purely ethical stance.

    It’s genius is what it is. And so far there’s no evidence from anyone — anyone — who is putting together the bits and pieces and making connections. The unions, sure — but most democratic politicians in this state would (apparently) have the unions deal with this one solo.

    Once the pension fix is in the bag, the unions are (obviously) next.


  26. - JC - Wednesday, Jul 24, 13 @ 2:18 pm:

    Frenchie is right on. Those in the pension fund system and workers who have followed this every step of the way are crystal clear on what has been going on here but the general public who only listens to sound bites on talk tv believe all the press given to the civvies via the tribbies and have seen the full page ads and billboards slanted messages (who paid for those?)
    Because they have lots of cash to spend to spin this their way, they have jumped out in front. Of course, when you talk about tax reform, everybody’s hair bristles but in the graduated tax system, MOST people in the state would get a break. Of course the big boys would pay more but then again, most of us would like to have their cash to be ABLE to pay more of it to taxes.


  27. - Loop Lady - Wednesday, Jul 24, 13 @ 2:20 pm:

    The Federal Reserve, big banks and brokerage houses are just doing the bidding of the entitled class…when does the class warfare in the streets? Seriously though what can the average guy or gal do to level the playing field?


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