In 2006 a financial crisis of unprecedented magnitude hit America.
Wall Street, with at least complicit support from our legislators, the DOJ and regulatory agencies began to create new financial instruments to sell to the American people. Unfortunately, these new investments consisted of pools of troubled mortgages.
What made this all possible was that the three big credit rating agencies handed out high investment grade credit ratings that allowed the complicit banks to sell these investments to the general public.
It really was that simple. Today there is universal agreement that Moody’s, S&P and Fitch provided fraudulent credit ratings.
Could you image what would happen to a real estate appraiser that knowingly issued home values that were hundreds of thousand higher than the value of the property and a dishonest borrower that borrowed millions based on these phony valuations. The Banks would incur millions in losses and the borrower and appraiser would go to jail.
As of 2016, not one employee or executive at the rating agencies were ever charged.
Our legislature is the recipient of tens of millions per year in political contributions and paid speeches. None of that money comes without strings. Our Congressmen and Senators did what they were paid to do and protected their Wall Street friends. The DOJ and regulatory agencies are run by these very same legislators and were prevented from prosecuting anyone.
Six trillion dollars in lost wealth, six million homes lost to foreclosure and millions of jobs lost.
Well, the Credit Rating Agencies are at it again and this time our country does not have the resources to withstand another major crisis.
It has been a few years now since the start of the wholesale financial collapse of Puerto Rico. Sufficient time has passed allowing Individuals, companies, regulatory agencies and our legislators the time to understand the root causes of his crisis.
That’s right, you guessed it! All of the credit ratings issued on Puerto Rico debt were either misleading or outright fraudulent. But it does not end there, a quick review of bond ratings from Chicago, Connecticut, California and New York reflect similar concerns.
The municipal bond market is $4.2 trillion dollars. Preliminary indications suggest that as much as 60% of these bonds were sold to investors with an inappropriate or misleading credit rating.
Once again our regulatory agencies, the DOJ and our legislators have circled their wagons around Wall Street. No matter how many American’s need to be thrown under the bus, our government will not move against their friends.
So far tens of billions have been lost by our senior citizens who purchase these bonds to supplement their modest retirement incomes. It will not end with Puerto Rico; Puerto Rico is only the beginning.
Richard Lawless is a career Banker and CEO of Commercial Solar Power, Inc. Lawless has been working with the SEC, the FBI, The U.S. Attorney’s Office and the Treasury Department to uncover the reasons for Puerto Rico’s $70-billion-dollar bond default. Lawless has held Senior and Executive positions with Wells Fargo Bank, Home Savings and Washington Mutual Bank specializing in the issuance of debt instruments. Lawless holds a BA from Pepperdine University and a Master’s Degree from the University of San Diego.
