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* Yvette Shields at the Bond Buyer...
“Corruption of public officials makes headlines, but if it is one-time in nature it is unlikely to have any credit impact,” said Emily Raimes, a vice president and senior credit officer at Moody’s.
“We consider corruption as part of our overall governance assessment, however, if it is long-term or systemic, particularly if it has affected the government’s financial stability, or is likely to affect financial stability in the future,” she said.
“Anything in government relies on some level of trust. I think if corruption is rampant or repetitive it can make the next tax increase or capital request harder to approve because people don’t trust you are going to do the right thing,” said Geoffrey Buswick, sector lead and lead Illinois analyst at S&P.
“That’s the longer play that is harder to assess in credit because when does that erosion of public trust limit flexibility? It’s not always clear,” Buswick said.
There are those who believe the Fair Tax tanked for this very reason.
Plenty more quotes in that story, but I wanted to focus on what the raters said, so click here and read the rest.
posted by Rich Miller
Thursday, Mar 17, 22 @ 11:45 am
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=== “That’s the longer play that is harder to assess in credit because when does that erosion of public trust limit flexibility? It’s not always clear,” Buswick said.===
I’m always amazed, and I’m not dismissing this, or even what they are saying…
… but it’s wholly dishonest of these raters to discuss trust and honesty and they ignore the constitutional realities to debt as a real thing to looking at this state and it’s credit rating.
Again, citing corruption, and all that is with that, it again shows how arbitrary things are that are looked at… but it’s interesting insight.
Comment by Oswego Willy Thursday, Mar 17, 22 @ 11:53 am
In illinois, corruption is a feature, not a bug.
Comment by Bruce( no not him) Thursday, Mar 17, 22 @ 12:01 pm
Gotta love the how rating agencies and pension naysayers constantly pull the Henny Penny act yet, all the while, the bills keep getting (and have always been) paid.
Comment by Jocko Thursday, Mar 17, 22 @ 12:01 pm
Certainly, corruption plays a part in the distrust of government institutions, but trashing our institutions has become America’s favorite sport. It’s also the primary message focus of the GOP. Unfortunately, much of the messaging is based on distortions and outright lies.
Comment by Norseman Thursday, Mar 17, 22 @ 12:05 pm
The fair tax failed because there was a huge misinformation campaign about it, and enough people believed it.
Comment by The Velvet Frog Thursday, Mar 17, 22 @ 12:08 pm
an excellent article which was written because it is foremost on the mind of every investor and muni bond participant nationwide. It is the most discussed topic of local government officials outside of Illinois. It will take a long time to remove the stench and stain .
Comment by northshore cynic Thursday, Mar 17, 22 @ 12:12 pm
Nothing like a good ethics lecture from Wall Street.
A better question for the rating agencies would be how did they rebuild credibility and trust after their corrupt practices tanked the American economy?
I’ll hang up and listen.
Comment by Michelle Flaherty Thursday, Mar 17, 22 @ 12:13 pm
“The fair tax failed because there was a huge misinformation campaign about it, and enough people believed it.”
I agree with you. But I also think the misinformation campaign was directed at people who already don’t trust the government and the misinformation played into their anger, fears, anxieties, distrust, etc.
Comment by Baloneymous Thursday, Mar 17, 22 @ 12:18 pm
I am constantly amazed by those who blame the ratings agencies when it is the state legislature who have largely ignored the constitutional realities of debt and it’s effect on the state’s credit rating for the past 20+ years
Comment by Lucky Pierre Thursday, Mar 17, 22 @ 12:20 pm
More evidence that state government bond ratings are voodoo. Those ratings are supposed to reflect a risk of debt default, something we never got close to even at the height of the Rauner budget crisis. The failure of the Fair Tax certainly didn’t trigger any default concerns.
There’s a case to be made that the Madigan indictment prevents some future corruption. The stronger case, however, is that no indictment in Illinois history has involved an amount of money large enough to affect the likelihood of default. If the bond rating agencies are using the indictment of a retired politician to transfer more taxpayer money to debt investors, it’s time to reconsider the debt rating system.
Comment by vern Thursday, Mar 17, 22 @ 12:23 pm
=== There’s a case to be made that the Madigan indictment prevents some future corruption.===
It was thought the GHR conviction would’ve prevent corruption… then Rod…
Comment by Oswego Willy Thursday, Mar 17, 22 @ 12:27 pm
Since the fair tax(a misnomer if there ever was one) States have gone in the reverse direction both lowering the applicable rates and going from progressive to flat structures. To the extent there ever was a chance to move to a progressive rate structure that time has passed
Comment by Sue Thursday, Mar 17, 22 @ 12:34 pm
===I am constantly amazed===
No you’re not.
If memory serves…. when Rauner dismissed credit ratings, you concurred.
I’m amazed you forgot that, lol
Comment by Oswego Willy Thursday, Mar 17, 22 @ 12:46 pm
“constitutional realities of debt”
When did Illinois ever default on or miss a bond payment?
…
[crickets]
Comment by Huh? Thursday, Mar 17, 22 @ 12:50 pm
” … when it is the state legislature who have largely ignored … .”
Ever hear of Jim Thompson’s “60% of payout” ?? The “Edgar Pension Ramp” ??
Comment by Anyone Remember Thursday, Mar 17, 22 @ 12:51 pm
First the “fair tax” failed becuase the “yes” campagn sucked at every level
Second the notion Moody’s sends someone out to talk ethics is beyond a hoot.
Did they forget the 08-09 Cheney-Bush Depression after they rated mortgage backed paper AAA? Back to the bench. Same applies to the thieves at S&P and Fitch.
Comment by Annonin' Thursday, Mar 17, 22 @ 12:52 pm
@ Sue
Except in a couple years when all of those states are reversing the temporary cuts or raising taxes that hit lowest income folks the hardest. The great Kansas tax debacle isn’t that far in the past despite the corporate propaganda.
Comment by Chicago Blue Thursday, Mar 17, 22 @ 1:19 pm
-There’s a case to be made that the Madigan indictment prevents some future corruption.-
Sadly, there’s no evidence to suggest Madigan being indicted will change much. It does open up opportunities for new blood .
Comment by Steve Thursday, Mar 17, 22 @ 1:25 pm
“-There’s a case to be made that the [indicted politician’s name] indictment prevents some future corruption.-
Sadly, there’s no evidence to suggest [indicted politician’s name] being indicted will change much.”
Why pick Madigan? Why not name ryan, blago, burke, or any other indicted politician? The list of high profile politicians who have been indicted and/or convicted has not made a whit of difference.
Name one politician who has said that they won’t cross a line because of [indicted politician’s name].
Comment by Huh? Thursday, Mar 17, 22 @ 1:58 pm
I concur with Huh? at 1:58. Crooks being caught doesn’t deter other crooks from being crooks. It just teaches those other crooks to find new ways to avoid getting caught.
Comment by Occasional Quipper Thursday, Mar 17, 22 @ 2:11 pm
=== Name one politician who has said that they won’t cross a line because of [indicted politician’s name] ===
Okay, I’ve seen several people suggest that the Madigan indictment was a contributing factor in Steve Landek’s decision to retire. The Tribune reported that Landek had gotten appointed to the Senate with Madigan’s help and gave a Bridgeview village contract to his son.
With that out of the way, I’d invite you to engage with with my broader point. Which corruption scandal put Illinois state government at risk of debt default? That’s the only risk that rating agencies are supposed to be evaluating.
Comment by vern Thursday, Mar 17, 22 @ 2:39 pm
=== === Name one politician who has said that they won’t cross a line because of [indicted politician’s name] ===
Okay, I’ve seen several people suggest that the Madigan indictment was a contributing factor in Steve Landek’s decision to retire.===
This reads like you are saying someone is retiring because they are thinking twice about being corrupt.
I don’t think you want it to read that way, but that’s how it comes off.
Comment by Oswego Willy Thursday, Mar 17, 22 @ 2:43 pm
I’m saying someone is retiring because they are thinking twice about being a Senator. It’s an example of a close Madigan ally stepping away from a position of power post-indictment. “Corrupt” isn’t a word with a set definition, and it’s clear that Madigan thinks he was just doing normal politics (the same excuse as Blago). Nobody thinks they’re the villain of their own life story, but stepping away from elected office is a change of behavior that answer’s Huh’s riddle.
Comment by vern Thursday, Mar 17, 22 @ 2:56 pm
=== I’m saying someone is retiring because they are thinking twice about being a Senator.===
Being a senator means you’re corrupt? No.
Being a senator implies you’re already corrupt and just not caught? No.
=== Nobody thinks they’re the villain of their own life story, but stepping away from elected office is a change of behavior that answer’s==
So you *are* saying Landek is corrupt, and is getting out because he realized he’s a villain?
I know it’s St. Patrick’s Day, but how much Irish Whiskey and Guinness are you into to land there?
If you know something, I’d suggest you also call the US Attorney or arrest yourself for aiding by not talking.
I mean… for real… seriously…
Comment by Oswego Willy Thursday, Mar 17, 22 @ 3:02 pm
Madigan’s case stands out compared to either Blago or Ryan. Both governors allowed total imbeciles who they were close to to exploit their relationships for their own gains. Neither of the governors ever financially benefitted from the schemes which led to their convictions. Madigan truly monetized his office for his own financial advantages and became mega wealthy in the process.
Comment by Sue Thursday, Mar 17, 22 @ 3:03 pm
== The fair tax failed because there was a huge misinformation campaign about it, and enough people believed it.==
Is that you Christian Mitchell? The FT failed because this insulated administration told everyone who has been successful in Illinois politics “we don’t need you” and went it alone. Pritzker was fighting an already uphill battle and saw one poll that showed early promise and assumed no one would seriously opposed it.
Sigh. To the post, Wall Street can get off it’s high horse about ethics. That steed is as tall as Little Sebastian from Parks and Rec.
Comment by MG85 Thursday, Mar 17, 22 @ 3:11 pm
=== So you *are* saying Landek is corrupt, and is getting out because he realized he’s a villain? ===
No. To be as precise as possible, I am postulating that Madigan’s indictment has led some of his allies to conclude that “normal politics” as they understand it has been criminalized and are thus stepping back from politics. Landek is an example of a Madigan ally leaving elected office post-indictment.
I’m not accusing anyone of any crimes and I’m only discussing facts that have been publicly reported.
Mostly what I’m trying to do is question the rating agencies’ framework for deciding how much interest state governments have to pay.
Comment by vern Thursday, Mar 17, 22 @ 3:24 pm
===…led some of his allies to conclude that “normal politics” as they understand it has been criminalized and are thus stepping back from politics.===
Sigh…
So your take *is* this;
Being a senator implies you’re already corrupt and just not caught.
So you *are* saying Landek is corrupt, and is getting out because he realized he’s a villain.
You’ve bought into that.
Whew.
Comment by Oswego Willy Thursday, Mar 17, 22 @ 3:47 pm
In 2011, I took a survey of local Illinois economic development officials. Seventy responded. Among my questions was one about corruption: Has the perception of public corruption in Illinois affected your ability to recruit business from out of state. Three-quarters responded that the perception had a “negative” or “highly negative” effect on their capacity to recruit business. I could provide comments from respondents. For example, one said: “Upon arrival, one executive asked: “Do I have to start by giving you a big political contribution?” It was in jest, but it was an awkward start to our conversation. Another official said that Illinois has a wide reputation as a “pay to play” state.
Comment by Jim Nowlan Thursday, Mar 17, 22 @ 4:07 pm
- Jim Nowlan -
While interesting, how is that impactful to alleged ratings if one factor in those ratings hasn’t been considering payment history or legal responsibility to debt?
It’s an interesting discussion while having drinks before dinner, I grant you, but having arbitrary feelings attached to ratings while ignoring monetary realities like payment history or legal responsibilities like a constitution are ignored… it sounds like a racket.
It is interesting the perception.
Comment by Oswego Willy Thursday, Mar 17, 22 @ 4:12 pm
“Which corruption scandal put Illinois state government at risk of debt default?”
In my memory, none. I am sure people with a greater understanding of illinois history could answer the question.
However, that question ignores my question of when has Illinois ever defaulted or missed a bond payment?
Comment by Huh? Thursday, Mar 17, 22 @ 4:52 pm