Lately, the Egan-Jones credit ratings agency has experienced a lot of bad publicity from the co-opted and conflicted media, especially those in which GE has a minority stake, for no other reason than being the only organization that is in some way a part of the status quo yet dares to constantly lash out at the lies behind the scenes and expose the fraud and corruption that permeates the modern Ponzi system. Frankly, we have had it with this propaganda. Confirming that when it comes to honesty and integrity, EJ may or may not be at the front of the pack, but they sure tried to warn other about the impending systemic collapse. Presented below is an interview conducted by Kate Welling with Sean Egan back on June 30, 2006, or the absolute peak of the credit bubble frenzy, in which everything Egan said: down to the most dire prediction, has occurred. Somehow we are confident people slighted, mocked and ridiculed him then as well. He was right then. He will be right again.
W@W: One necessary step in creating a really big investment fraud is hitching your company’s wagon to Wall Street’s perpetual financing machine.
Sean Egan: Yes. Fannie Mae (FNM) and Freddie Mac (FRE) are beautiful at that, by the way.
Oh, they’re the best at that. We don’t rate them anywhere near AAA. [note: everyone else did until August 2008, when both were nationalized]
I have the sense that with Fannie and Freddie we’re experiencing the investment equivalent of the Night of the Living Dead.
I like that analogy.
They’re “living” proof that financial institutions can be too big to fail.
It’s funny; we rate them at about A or A minus.
Well, what we’d really like to rate them is probably about a single B+ or so. The reason why we don’t is because—our credibility—our rating is low enough so that we wave a red flag. I mean, it’s probably four or five notches away from S&P and Moody’s AAA. Then too, you have to give some credence to the idea that the Government will probably step in. But on a stand-alone basis, or if you assume that it’s only the $2.2 billion credit line that would be available from the Treasury, then they should be rated way down in the single-B or BB category.
Ah, the bond world is still so much more of a polite and genteel place than the equity markets.
I agree. Just think about it—Fannie and Freddie don’t have to put up any margin with the brokers dealers, because they’re rated AAA by S&P and Moody’s. It’s all so incestuous.
That alone must be worth zillions–
Imagine what would happen if they didn’t have even a portion of their supposed portfolio profits to report. We doubt that they actually have those profits; we doubt that real capital is there. And it seems like every couple of months another accounting fiasco surfaces either at Fannie or Freddie.
They’re still finding the corpses.
Our other major issue with them is that we question whether anyone really can effectively hedge a trillion-dollar-plus portfolio.
I’m sure they have hired somebody from MIT who thinks they’ve got it done.
Right, except when it comes down to it, there is no one on the other side of all those trades.
Either that, or everyone is on the other side of those trades, which is the same thing.
That’s a good way of putting it. You and I and every other taxpayer are actually on the other side.
As usual, spot on. Full interview below: