The Barometer has had its chastisements for S & P over its failure to allow the concerns of its analysts to percolate up into actually stating publicly that the subprime mortgage instruments were junk. Not exactly equipped with an itchy trigger finger, S & P did not downgrade the investment banks until December 2008. Give ‘em three months following a market collapse, and they were Johnny-on-the-spot! And it wasn’t as if those within the belly of this venerable institution did not see the issues. “Let’s hope we are all wealthy and retired by the time this house of cards falters,†was in one e-mail from and S & P employee regarding the mortgage-backed CDOs. Deals put together by cows were investment grade in S & P’s mind during the real estate boom/bubble.
But, with the S & P downgrade of the U.S. debt rating by S & P from AAA to AA-plus late Friday, August 5, 2011, means one of two things. If S & P has not internalized its lessons from the subprime mess, then the downgrade means that the United States is in worse shape than firms with deals put together by cows. In other words, if this is a firm with loosey-goosey standards and it speaks up, well the handwriting on the wall portends Italy, Spain, and Greece fates for the U.S. However, the second alternative is the one the Barometer wants to believe. S & P, mightily embarrassed and emerging from the introspection of nearly three years of, “How did we get it so wrong?â€, has pledged, “Never again.†If such a transformation is the case, then U.S. is still in serious trouble, but maybe not of the bovine deal level.
There is still one more scenario the Barometer hopes applies to S & P. Its committee took a look around two of the three branches of the U.S., and concluded, “There are no longer statesmen running this nation.†Heck, the committee may have concluded, “There are no longer any adults at the table. Either way, S & P has it right. By calling a shot that needed to be called, this much maligned rating agency may actually do for the United States what it has been unable to do for itself: Make the decision to (finally) take the real economic, but continually postponed, pain of the subprime market collapse and accept the consequences of reining in excessive government spending, growth and entitlements. S & P has done for us what we were unable to do for ourselves: Acknowledge the unassailable facts that found us at a tipping point. Our leaders failed to put into place, despite advance warnings from S & P, the necessary fiscal actions that would demonstrate responsibility, accountability, and leadership through a long-term plan for reducing our debt.
S & P’s action has driven home the sobering point that we passed political battle two years ago. Regardless of how one feels about S & P’s role in rating subprime-based instruments, the president, Congress, or any political party, the message from S & P was a loud and clear, “Stop the madness!â€
The goose is out of golden eggs. S & P has said as much. Superficial cuts and more debt will kill the goose. Thank goodness that the adults have emerged in the insanity of PR-spun, self-destructive deals. The Barometer is grateful for S & P’s candor and courage. S & P’s country needed its service, conscriptive though it may have been. S & P stepped up and has atoned for past wrongs.
About mmjdiary
Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD.
The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards.
Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio.
She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News.
In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles.
Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
