Bombshell: Plutocrats Brazenly Collude to Hurt State Economies and Screw Working People

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Fahner: “The Civic Committee, not me, but me and 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?"

Fahner went on to take credit for downgrades to Illinois credit ratings, saying, "If you watch what happened in the last few years, it's been steadily down.”

Check out the video at minutes 46:30 to 49:43 for the full remarks on the ratings scam: “ Fahner: Civic Committee helped jaw down state’s bond rating.”

As the audience member correctly adduced, pushing down the bond rating is a great way to screw workers, the state and taxpayers. Pension funds buy bonds, often from the state, to stay financially healthy. In order for the pension fund to buy the bond, it must have a passing grade. If the grade is lowered, say from A to B, the price of the bond goes down, and the pension fund will suffer a loss. If the bond rating is dropped below a minimum standard, then the pension fund must sell the bond, and take a much bigger loss.

Lowering the bond rating also has the effect of artificially inflating the interest rates that bond holders must pay on future bonds, making them more expensive to buy and reducing the state’s ability to borrow. The basic idea is to manufacture a crisis by financially starving pension funds. Fahner & Co. know this will put political pressure on Illinoisans to take away worker pension benefits.

In a nutshell, here’s what the video reveals:

• Corporate honchos — some of whom may have a vested financial interest in Illinois bonds — feel perfectly comfortable calling and exerting pressure on ratings agencies.

• Ratings agencies are political entities whose supposedly impartial research can be influenced and perhaps even bought.

• CEOs think nothing of willingly and knowingly screwing the bond rating and economic standing of their home state in order to enact their anti-worker philosophy and fatten their own bank accounts.

• Proclaiming you are “fixing” state fiscal problems is a great cover for potential insider self-dealing in the bond market.

• Committing economic treason against fellow citizens and taxpayers is simply a matter of course for today’s American plutocrats.

The We Are One Illinois union coalition has released a statement condemning Fahner and calling for an investigation into the matter:

"Ty Fahner and unnamed members of his corporate-backed committee have shown their true colors. Fahner bragged openly about joining members of the business-backed group, behind closed doors, in lobbying credit rating agencies to lower Illinois' bond ratings in an irresponsible and unethical attempt to put the state in an even more difficult position. They show total contempt for the taxpaying public, total disregard for the difficult fiscal challenges the state faces, and total hypocrisy over their alleged care for the working families of Illinois.”

In addition, a serious conflict of interest may exist if either these unnamed CEOs or the big corporations they control profited in any way from lobbying to make Illinois pay more interest on its bonds—bonds which they or their corporations may hold.”

All right. What the hell can be done about this shameless hustle?

The state attorney general should immediately open an investigation into whether any members of Fahner’s group sold bonds before the downgrades, based on their conversations. That is plainly insider trading. Everyone who held bonds at the time of the downgrades also took a loss. Attorneys general and treasurers in other states whose portfolios took a hit should also consider suing, given that political pressure seems to have played a role in causing their losses. Ditto for private holders and other unions—anyone who had the bonds at the time of the downgrade.