This week the Department of Justice (DOJ) announced they are pursuing Standard & Poor's for fraud because of their behavior during the sub prime mortgage era. The DOJ contends that the rating agency knew the securities they were rating AAA were not that creditworthy and they were influenced by the fees they were collecting rather than any objective analysis. I have been in the bond business for 40 years and an announcement like yesterday's is equivalent to coming down on Christmas morning and finding a pony under the tree. Finally the Feds are saying publicly what every bond market professional believes 100%. The rating agencies were selling ratings to the Wall Street banks with intentional, callous and complete disregard for the investors they claim to be protecting. Bond market professionals have been complaining about the mercenary nature of the rating agencies since I got into the business in 1972. I know it is too much to hope for but I would love to see Moody's be next.

I think across the board cuts in government spending is a good idea. I would argue that a 10% initial cut might be a little heavy but a 5-7% cut I believe would be absorbed by the recovering economy and while it will reduce growth it will not push us into a contraction. Everyone in the country knows we spend plenty of money on defense, education, social security etc., so a reduction should not affect the quality of life. I hope we don't have another last minute session of Congress where the Senators and Congressmen find a way to protect the status quo and try to sell us on the idea that they have actually made progress on the fiscal situation. Cut everybody equally and move on.