321 Greeks, Germans and Bankers: Tax collection is intensified to guarantee payments on bonds

Australia should only spend as much foreign currency as it earns - Professor Michael Hudson (item 1)

(1) Greeks, Germans and Bankers: Tax collection is intensified to guarantee payments on bonds
(2) Australia's Needless Foreign Borrowing - Michael Hudson and Shann Turnbull
(3) Australia should only spend as much foreign currency as it earns - Q to Michael Hudson
(4) Australia should only spend as much foreign currency as it earns - Hudson reply
(5) The Dangers of Internationalism - Arthur Kitson (1860 - 1937)
(6) MPC's Adam Posen warns Britain at risk of Japan-style deflation
(7) Suddenly, the Ratings Agencies Don't Look Untouchable

(1) Greeks, Germans and Bankers: Tax collection is intensified to guarantee payments on bonds

From: chris lenczner <chrispaul@netpci.com> Date: 09.06.2010 07:00 PM

Greeks, Germans and Bankers

The Return of the Ancien Régime

By T. P. WILKINSON

May 14 - 16, 2010

http://www.counterpunch.org/wilkinson05142010.html

Düsseldorf.

The German press is saturated with reports intended to verify the myth of the slovenly, lazy and corrupt Southern European countries which virtuous and hard-working northern European countries mistakenly admitted to the European Union.  ...

Whether Goldman Sachs was "needed" to perform "Enron-like" tasks on the Greek national accounts in order to pass the fiscal monetary test for the Euro may be subject to debate. The Euro regime was established to favor this kind of accounting because it was based on surrendering democratic control over theeconomy and fiscal policy. Every member of the Euro had private investment bankers manipulating the national accounts to meet the formal requirements for Euro membership. The control of the Euro, like the activities of the Bank of International Settlements, lies with the private commercial conspiracies (in terms of the US RICO Act) mistakenly named "banks". No country could have met these requirements democratically since they were antithetical to any democratic process. The preparation of national accounts according to criteria such as national indebtedness is in and of itself deceptive.

National governments issue debt for two reasons: a) to manage domestic currency supply and expenditure or b) to transfer earned wealth (from labor) to rentiers (in this case mainly banks) by creating and enforcing liens through taxation. In the latter case, the national government, controlled by bankers and their owners, becomes a derivative instrument used for controlling the underlying cashflows of a domestic economy. Of course the first reason for creating debt, e.g. issuing currency, is entirely legitimate. The government provides and manages a tool for facilitating exchange and transactions which are subject to limits of scope, geography and so forth. However, the second reason is essentially criminal.

Throughout Europe and in fact throughout the world, tax collection is intensified to guarantee payments on bonds underwritten by banks as devices for sucking the earned income out of the economy. These bonds are actually tantamount to the Privy Purse; they are direct feudal payments to an oligarchy of absolute rulers by divine right. They take precedence over all other obligations foreign or domestic. These bonds are usually tax-exempt to induce rentiers to buy them because of the "risk" they entail.

In fact the "risk" is an artificial classification agreed by the rentiers agents to fix the rate of extractive cashflow. One could compare it to the US "oil depletion allowance" which rewards the petroleum extractor for accelerating the rate of profit by reducing the tax in proportion to the exhaustion of the concession (for which the oil company rarely pays anything). In fact they cannot be taxed since this would frustrate their ultimate purpose—to bleed economies dry. The "sovereign credit rating" is a secretly negotiated deal between the parasites sucking off national income and the agents of government as to the rate of profit from taxation permissible before the banks and their principals attack the national economy through adverse currency trading, boycotts etc.

Governments that refuse to submit to the ratings cartel are blacklisted: that means neither they nor any normal business or persons in the country will be allowed access to credit or such access will only be at intolerable cost. When cash flows do not suffice—as with the depletion of an oil well—profits can only continue with the surrender of all the physical assets in the economy. First the public sector assets are sold or mortgaged then the small and medium-sized businesses are forced into insolvency when they can no longer meet their tax obligations or private debts. In Germany there is an unofficial policy (accidentally admitted by some people in the tax offices) of denying taxpayers deferrals in order to force them to seek bank financing (on near usurious terms). Banks in turn have been selling their loans to hedge funds—unregulated by banking law—which in turn foreclose on those loans in order to seize the land and other assets. Greece's national debt is in reality a complex food chain whereby labor and land are mortgaged to banks and transnational corporations and workers are cheated out of wages, pensions, and homes. There is no way to repay such debt. A person infested with tapeworm cannot eliminate the parasite by eating.

When the private banks which control the central banks, directly in the case of the Bank of England, Federal Reserve, Bank for International Settlements, World Bank, etc. or indirectly like the Bundesbank and to some extent the Banque du France, defined the rules for the Euro and created the European Central Bank as a Fed-clone, based on anti-inflationary targets and limits on public sector borrowing and debt, they were establishing totally rigid, anti-democratic criteria for fiscal and economic policy in all the member states. Banks and "the market" are elevated to god-like status where their demands are not only unilateral and non-reciprocal but they are immunized against any democratic claims. They acquire in every sense of the word "extraterritoriality". Quite literally this means legal entities originally conceived only by act of legislature are by what must be seen as virtual divine right—beyond the scope of the very legislature that gave them their charters and licenses to do business. ...

The temptation to focus on the debts and to find fault with what the Greeks bore as they joined the EU and the single currency is a great deception. The fact that Germany and the US could sell millions of dollars/ euros in weaponry to the Greek military while demanding the cancellation of every social obligation to its people is just one more proof of how we are deceived. Europe is saturated with corporations aided by scavengers like George Soros and crypto-banks like Goldman Sachs whose only reason for existence is to steal as much as possible and to return us to the penury, peonage and slavery that led the French to revolt and shorten the bodies of the parasites claiming to rule them.

T. P. Wilkinson writes and teaches politics and literature in Heinrich Heine's birthplace, Düsseldorf. He is also the author of Church Clothes, Land, Mission and the End of Apartheid in South Africa (Maisonneuve Press, 2003). Currently he is working on a book called: 1959: Unbecoming American. He can be reached at beda.v@maisonneuvepress.de.

(2) Australia's Needless Foreign Borrowing - Michael Hudson and Shann Turnbull

http://michael-hudson.com/2010/05/australia%e2%80%99s-needless-foreign-borrowing/

Australia's Needless Foreign Borrowing

May 24, 2010

Michael Hudson and Shann Turnbull*

(First published via Prosper Australia, written during Michael's recent Oz tour.)

Confronted by the global financial crisis that is burying foreign economies deeper in debt deflation each month, Australia needs to protect itself – indeed, to liberate itself from as many costs and risks as it can. Fortunately, many of its costs and risks are unnecessary, merely a result of the inertia of old ways of thinking.

Australia has the means to protect its growth and to keep more of its income at home. But if it is to remain immune to the GFC meltdown, it must escape from the risky environment of foreign financial dependency. This requires new arrangements to take account of the rapidly changing character of credit.

Foreign credit is the most obvious yet also most needless form of Australian dependency today. It is created without cost on computer keyboards in Japan, the United States and Britain and lent out at LIBOR rates as low as 1% to arbitrageurs buying Australian securities yielding at least 4.50% and rising. The 2 or 3% arbitrage gain is a free ride for speculators – at Australia's expense.

Over and above being a domestic expense, it must be paid in foreign exchange. This repayment will cause future pressure to drive the A$ back down, perpetuating Australia's roller-coaster exchange rate cycle.

There is a widespread impression that if Australia created a similar amount of credit at home, this would be inflationary. That may be true – but it is more inflationary to allow foreigners to manufacture credit and add an interest charge that domestic credit creation could avoid.

More immediately, the flow of foreign credit creation into Australian securities and loans to Australian banks pushes up the exchange rate. This makes Australian labor, products and services more costly in world markets. The strong dollar already has prompted companies to warn of lower earnings and employment in the immediate future.

Australia requires investment for nation building. Some people believe that this investment requires saving out of current earnings. The national saving rate has indeed turned up recently, but this statistic is deceptive. It is the result of Australian banks cutting back their lending, requiring home owners to consume less and save more to pay off their loans.

Does this mean that Australia needs to turn to foreigners to supply "savings"?

Not at all because foreign economies are in the same boat, paying off the enormous debts that the global real estate bubble has obliged homebuyers and others to take on in order to obtain access to housing.

Where then does the foreign lending come from, if not saving? The answer is hard for many people to believe, but it is new electronic "free lunch" credit creation.

Australia can create credit itself just as easily as foreigners. It is merely a policy choice to let foreigners perform this task and extract income from Australia with its higher interest rates.

Meanwhile, the balance of payments makes its manufactured exports less competitive, and even eats into the earnings of its mining industry. (Mineral prices are set in U.S. dollars or other foreign currency, which yields fewer Australian dollars as the latter's exchange rate rises.)

No nation need borrow in a foreign currency for spending in its domestic currency. Whether loans are created in Australia or at home, only Australia itself can create Australian money and credit.

The problem is that Australia runs a chronic current account deficit that needs to be financed with inward foreign investment if the exchange rate is to be held stable. Rather than "selling off the farm" and/or becoming indebted to foreigners, Australia should only spend as much foreign currency as it earns.

Market forces can achieve this result if exporters are not forced to gift the foreign currencies they earn to a national pool. Instead, exporters would obtain a second income by selling their foreign exchange to importers.

Without allowing market forces to keep current account transactions in balance, Australia is paying a high price for the self-imposed, old-fashioned view that it needs foreign money to invest at home. What the nation needs more than foreign credit is a more modern understanding that credit can be created without cost regardless of where it is created.??

To avoid inflation – and to give value to this credit – the government needs to levy taxes. In view of the statement by the Reserve Bank of Australia that the reason it is raising interest rates is to slow the property bubble, a tax on land values, with which Australia (unlike the U.S.) is already familiar, would address the problem without creating a rise in the A$, without pricing its manufacturing out of foreign and domestic markets, and without giving international arbitrageurs a free lunch.

* Michael Hudson is Distinguished Research Professor of Economics at the University of Missouri and Dr Shann Turnbull is Principal of the International Institute for Self-governance based in Sydney.

(3) Australia should only spend as much foreign currency as it earns - Q to Michael Hudson

Michael,

> Australia runs a chronic current account deficit ...
> Rather than "selling off the farm" and/or becoming
> indebted to foreigners, Australia should only
> spend as much foreign currency as it earns.

Australians are not aware that their Current Account Deficit leads to Foreign Debt or "selling off the farm".

I think this is because the Surplus nations' exporters receive A$ for their goods here, and deposit or invest their surplus here, in A$. Alternatively, they sell their A$ to their Central Bank  or other foreign investors, who keep those A$ here.

Thus the A$s stay here, but their ownership changes over time.

This is a different kind of Foreign Debt than that incurred by Third-World countries.

(4) Australia should only spend as much foreign currency as it earns - Hudson reply

Australia should only spend as much foreign currency as it earns

   Michael Hudson <michael.hudson@earthlink.net> 7 June 2010 04:25
To: Peter Myers <petermyersaus@gmail.com>

The question is, wha do foreigners DO with the A$'s they earn. Do they buy
industry, or high-yielding government debt? I gave TWO alternatives.

Recycling A$s means becoming more indebted.

Michael

(5) The Dangers of Internationalism - Arthur Kitson (1860 - 1937)

The Dangers of Internationalism

by Arthur Kitson (1860 - 1937)

http://groups.yahoo.com/group/frameup/message/28505

Owing to the failure of the world's Governments to discover a remedy for the economic evils with which all nations are now afflicted, we are being told by our leading politicians, economists and journalists that no nation is to-day, a master of its own destiny, and that the economic affairs of the world are so interwoven that a remedy can only be found in the union of all nations. It is proposed by various publicists that it will be necessary to have an international currency, that all tariffs must be abolished, and Sir Arthur Salter goes so far as to propose a federation of the various European races. Apparently, these writers and speakers have given but superficial consideration to this whole subject, or else they are the instruments of the financial group that is bent upon controlling the trade, industries, and even the politics of the world.

Let us first take the subject of tariffs: The object of tariff protection is to limit competition mainly to the producers of the country in which protection has been adopted. Protection has been made necessary by the attempt to establish a universal monetary system. If we take the United States as an illustration: Their plea for protective tariffs has always been the protection of American labour for the purpose of raising the status of the working classes above the level of that of other nations. In this respect the tariffs have been unquestionably effective. In no country in the world has labour been more highly paid. Moreover, it is quite certain that had there been no tariffs, one of two things would have happened, either the United States would have been inundated with goods from the Far East, such as China and Japan and India, and many of her industries would have been destroyed; or else the American operatives would have had to live on a very much lower plane of existence.

Now turning to the financial question -- the effects of a universal currency would be, in the absence of tariffs, to reduce the working classes of all countries to one very low standard of living. The masses of mankind wold be engaged in a life and death struggle for the possession of money and for the control of foreign markets, and the nation who could produce goods at the cheapest rate -- in other words, the nation whose operatives could be induced to live at the lowest stage of existence compatible with their ability to produce goods -- would become the most successful!

No greater calamity could befall the world's inhabitants than the establishment of the economic system which the League of Nations is at present endeavouring to arrange. Both the financial and economic systems which the League has championed, are fraught with the greatest disaster to humanity. We have had the experience of the evils of the League's establishing the gold standard throughout Europe. The present crisis is the result of that absurd policy.

Far from adopting a universal world currency, the most beneficial policy would be for each nation to have its own national paper currency -- a currency that has no circulating power beyond the boundaries of the nation issuing it. Such a currency forms a natual protection for its trade and industries. It prevents the cut-throat competition which a world currency permits, and it renders international trade a system of barter -- that is, the exchange of goods for goods, which is the natural and rightful form of trade.

When England exchanges its coal and iron, cotton and wollen goods for products which it does not or cannot produce -- such as coffee, tea, spices, etc. -- such trade is mutually beneficial to the countries engaged therein. But when Germany sends us cotton goods to compete in our own markets with our cotton goods, when America sends us boots and shoes to compete with our Leicester and Northampton shoe industries, and in return demands gold or our National Bonds, we are exposed to a twofold injury: the importation of what we are already manufacturing injures our industries and thereby lessens employment here, whilst the export of gold which has been the basis of our currency causes a shortage of purchasing power and tends to raise our Bank rate which adds to our costs of production and lessens the demand for our goods in our home market. Similarly, the export of our National Bonds tends to make us a tributary country so that we have to export gold or other commodities as a tribute to the nation possessing the bonds for which we get no return.

The plea for world-wide or an international currency is of modern conception and has originated with the group of international money dealers who, to a large extent, control the money and credit of the world. This group have a settled policy, and all that is happening, and has happened for the last few years throughout the world, is according to a definite plan, viz., the world's conquest.

Unitl the beginning of the present century, the only known method of conquering the world was by military invasion -- a very dangerous, expensive, and cruel system. But during the last half century it was realized that a far simpler, more effective and less dangerous method was possible by the control of money. By this method no armies or navies or munitions of war are required, no blood need be shed, and the public need know nothing of their danger until they are safely enslaved in the form of Debt. All that is necessary is to secure the control of the press and other channels of publicity such as the radio and leading publicists.

This has already been done. International finance controls practically all the channels by which the public are influenced. The world's safety will only be achived by breaking the money monopoly that has been established by the laws of nations.

(6) MPC's Adam Posen warns Britain at risk of Japan-style deflation
Britain is at risk of sliding into a Japan-style episode of deflation, and may be even worse-equipped than the Asian country to escape, a Bank of England policymaker has warned.

By Edmund Conway

Published: 8:45PM BST 24 May 2010

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7760827/MPCs-Adam-Posen-warns-Britain-at-risk-of-Japan-style-deflation.html

Adam Posen, a member of the Bank's Monetary Policy Committee, said that although Britain and the US were unlikely to face repeated recessions, in many senses their plight was "scarier" than Japan's. The warning is of particular significance because Mr Posen - an American economist - was recruited to the MPC partly because he is a renowned Japan expert.

In speech at the London School of Economics, he said: "The UK worryingly combines a couple of financial parallels to Japan with far less room for fiscal action to compensate for them than Japan had."

Britain faces an uncomfortable trio of obstacles, none of which faced Japan in the 1980s or 1990s. Unlike Japan, Britain has to sell a large proportion of its debt to overseas investors, who are more likely to exit the market if they become scared of Britain's fiscal prospects. The UK also faces the challenge of having to boost a troubled manufacturing sector if it is to recover sufficiently. Unlike Japan, it does not have the luxury of having a worldwide market with a large and growing appetite for exports.

He also warned that the banking system's continued troubles would undermine companies' abilities to raise funds, and pointed out that businesses already appeared to be hoarding savings - something which happened in Japan.

Using a film analogy, Mr Posen said that it was possible that there could be UK "remake" of the Japanese episode.

"Unfortunately, the ironic twist for this upcoming film is that in some ways the remake might be scarier than the original. That risk arises not only because the original Great Recession was not quite so scary as previously thought on close viewing, but because Japan actually had various resources with which to manage its situation while the UK and other economies are not similarly endowed, even if some Japanese policymakers failed to take advantage of them."

The warning may come as a surprise to some, since last week the Office for National Statistics revealed that the Retail Price Index measure of inflation had risen to an 18-year high of 5.3pc. However, there is a growing number of economists who fear that the current relapse of financial stress could spark a global double-dip recession.

Andrew Roberts, credit strategist at RBS, said last week that the world could be heading for Great Depression II. Albert Edwards of Societe Generale expects some years of deflation, followed by hyperinflation as countries monetise their deficits.

(7) Suddenly, the Ratings Agencies Don't Look Untouchable

Published: Sunday, 23 May 2010 | 9:59 AM ET

http://www.cnbc.com/id/37300589

RON GRASSI will admit that when he decided to sue the three major rating agencies in early 2009, he was too enraged to think about his odds. A retired family law specialist who lives in California, he filed his suit in a low boil a few months after $40,000 in Lehman Brothers corporate bonds he owned all but vanished when the investment bank collapsed.

At first, he was furious at the bank. But then he decided the true villains were the rating agencies that had stamped those now-worthless bonds with high grades.

"My friends were complaining and moaning about what had happened on Wall Street, but nobody was doing anything about it," says Mr. Grassi, 69. "By sheer coincidence, there's a state court a few blocks from where I live in Tahoe City, and one day I walked down there, filled out a two-page form and sued."

Since then, he has forced the defendants — Standard & Poor's , Moody's and Fitch — to spend a small fortune on legal fees. At one hearing, the companies sent no less than nine lawyers. Unfortunately for Mr. Grassi, little else about his lawsuit has gone as planned. Currently he's appealing a judge's decision in March to dismiss his case.

His solo legal assault is unique, but his results, it turns out, are not. There are roughly 30 lawsuits aimed at the rating agencies, and though many of the battles, including Mr. Grassi's, are still unfolding, this much is clear: in the realm of private litigation, so far, the rating agencies are winning. Of the 15 motions to dismiss already acted on by judges, the rating agencies have prevailed 12 times, according to the Standard & Poor's legal team, which keeps a running tally. In addition, five cases have been dropped.

"We're making good progress in the courts and believe the remaining claims are without merit," says Ted Smyth, an executive vice president at McGraw-Hill , which owns S.& P. Michael Adler, a Moody's spokesman, says that "in many cases these suits have been found to be without merit, and we will continue to vigorously defend against these suits as appropriate." Fitch declined to comment.

It's an impressive run of victories, of a piece with the industry's nearly perfect litigation record over the years. But it is just about the only good news the rating agencies can point to these days.

The streak of dismissals notwithstanding, several major lawsuits against the rating agencies have survived the pretrial phase and might — emphasis on might — end with huge jury verdicts or expensive settlements. In addition, a newly emboldened Congress is on the verge of overhauling financial regulation and could rewrite the rules of the industry.

For S.& P., Moody's and Fitch, this is a war on two fronts. And while fought in vastly different realms — in courts and in Washington — the fights have this in common: either could wind up costing the rating agencies vast sums of money.

"I'm not seeing any signals that hedge funds are pouring in to short these stocks, like we saw with Lehman and Bear Stearns ," says Adam Savett of RiskMetrics, a corporate advisory firm. "But if the ratings agencies lose some of these battles, and especially if we see a big jury verdict, there will be blood in the water, and the sharks are going to swim."

The threat from Washington is relatively new. For months, it looked as though S.& P., Moody's and Fitch would escape the regulatory overhaul relatively unscathed.

But on Thursday the Senate passed a bill that included two notable ratings-related amendments. The first, by Senator George LeMieux, Republican of Florida, would strip from federal laws a requirement that a variety of institutional buyers — including banks, insurers and money market funds — buy only products stamped with a high grade by a rating agency. The idea is to encourage bond buyers to conduct their own research, or think creatively about outsourcing that job, instead of reflexively relying on S.& P., Moody's and Fitch. The big three rating agencies, the amendment's supporters hope, would no longer be the default raters for Wall Street.

Then there's the amendment from Senator Al Franken , Democrat of Minnesota, which is an attempt to upend the conflict of interest that has been at the heart of the rating agencies for some 30 years. Currently, bond issuers pay for grades to their products, giving rating agencies a financial incentive to provide high grades. Senator Franken's amendment calls for the creation of a Credit Rating Agency Board, essentially a committee that would pair issuers with rating agencies.

The goal is to break the direct link between issuers and raters and theoretically reduce the financial incentives that led to so many wildly inflated grades. It's an idea that is even more revolutionary than it sounds, because the committee could turn the handful of smaller and newer rating agencies — which have barely registered in terms of market share — into players.

If the amendment works as planned, the three-way oligopoly that has long dominated the ratings business could be doomed.

As Congress appears to have roused itself to action, so too has the Securities and Exchange Commission . Moody's recently disclosed that the commission had warned that it might sue the company. At issue are a number of former Moody's executives who allowed some European derivatives to keep their high ratings even after it became clear that the grades were the result of a computer glitch. The particulars of the suit, however, aren't as important as the signal that it has sent.

"This along with the Goldman Sachs [GS  Loading...      ()    ] lawsuit is a clear indication that the S.E.C. wants us to believe that it's getting tougher," says Lawrence White, a professor of economics at New York University . "The S.E.C. wants the world to know that the cop is back on the beat."

IT'S too early to say what Washington's legislative and regulatory actions portend for the rating agencies, but already they have altered the sense, prevalent as recently as three months ago, that these companies are in a business so complicated, and operating in an economy so fragile, that it is best to leave them undisturbed.

Perhaps legislators have been emboldened to fiddle with our nation's troubled financial machinery because the economy is stronger, making any tinkering less threatening to the entire contraption. Maybe it is part of a populist anger over Wall Street bonuses and the banks' exceptionally strong earnings reports. Whatever the cause, the atmospherics have changed.

A similar shift might be happening in the courts, though if Ron Grassi's lawsuit is any indication, beating the rating agencies legally is still a very difficult maneuver.

The origins of his case can be traced to 2004, when he and his wife, Sally, were looking for very safe investments for their retirement years. A broker explained that the high ratings awarded by the three agencies — A+ from S.& P., A1 from Moody's, AA-1 from Fitch — were proof the Lehman bonds were all but risk-free. They expected that by 2023, they would have their $40,000 in principal back, plus $90,000.

Two months after Lehman's collapse in September 2008, Mr. Grassi called Lehman's bankruptcy committee. A representative there said he could expect pennies on the dollar.

"Then I started thinking that the real culprit here isn't Lehman," says Mr. Grassi. "The only reason I bought those bonds is because the ratings agencies said the bonds were investment grade. But at the time, Lehman was loaded with all of these incredibly risky mortgage-backed securities. No one who actually studied Lehman's books could possibly have described the company's bonds as investment grade."

After he filed his suit, he converted the guest room in his three-bedroom home into what he calls the "war room." A set of bunk beds was soon piled high with documents and books about the financial crisis. When his case was moved to federal court — because he was suing out-of-state defendants — he bought an introductory guide to federal civil procedure.

At a hearing in July, he squared off against a crowded bench of opposing lawyers, including Floyd Abrams , a renowned First Amendment attorney and S.& P.'s lead counsel in these cases. ("We talked about our favorite New York delis," says Mr. Grassi.)

One of Mr. Abrams's arguments, as he put it in a recent phone interview, is that "it can't be the case that any of the millions of people who purchased a particular bond can bring a lawsuit against a rating agency or an auditor, saying it turned out to be wrong."

In March, Judge Dale A. Drozd in Sacramento seemed to agree with that reasoning when he granted the rating agencies' motion to dismiss the case. Essentially, the judge contended that since Mr. Grassi never had contact with a rating agency representative before buying the bonds, the companies didn't owe him a "duty" — a legal obligation that could form the basis of a negligence claim.

The issue of duty is just one of a batch of defenses that have long given the rating agencies a kind of legal force field that has yet to be breached. Several judges have rejected the idea that the rating agencies worked so closely with the investment banks that they were essentially co-underwriters. And a 77-year-old regulation exempts rating agencies from the definition of "experts" who can be sued.

"It's important to understand," says Joel Laitman of the law firm Cohen Milstein Sellers & Toll, which has seen two of its five lawsuits against the agencies dismissed, "they're winning because this is not a level playing field."

As for the apparent conflict of interest built into the rating agencies' business model — judges have ruled that it has been around so long and is so widely known that it isn't a cause of action. And, of course, the rating agencies have long and successfully argued that their grades are just opinions about the future and therefore entitled to robust First Amendment protections, like those afforded journalists.

The success of these and other defenses has kept a number of potential litigants on the sidelines, say experts, and that includes state attorneys general. After attorneys general in Ohio and Connecticut sued the rating agencies, it looked for a moment as though the companies would face a collective assault similar to the one that forced cigarette makers into a global, multibillion-dollar settlement in 1998. But since March, when Connecticut filed, no other attorney general has jumped in.

"I don't have a good explanation," says Ohio's attorney general, Richard Cordray. "I fully expected more states to join by now."