Elizabeth Salaam 11 a.m., Sept. 17
Sanders Claims City Can Return to Bond Market. Oh? That Will Be Up to Investors. Bond Rating Agencies Suffer from Bad Reputation
Mayor Jerry Sanders today (May 15) exulted, "This is the most significant day in the City of San Diego in the past four years. The City once again has access to the bond market." Sorry, Jerry. Investors will decide that. The mayor's statement is just more hyperbole. Standard & Poor's once again gave San Diego general obligation bonds a rating -- a tepid A rating. S&P has only four investment grade ratings: AAA, AA, A, and BBB. The A rating is third of those four categories. Many more cities have AA ratings. Bond rating agencies have the worst reputation they have ever had. They gave AAA ratings to portfolios full of doggy mortgages. People are beginning to understand that the rating agencies are paid by the institutions they rate -- a very obvious conflict of interest that the financial community hasn't tackled. The timing of this event before the election is suspicious. S&P's rating may do little, particularly since the 2007 audit hasn't been finished. S&P's claim that San Diego has improved its financial practices does not jibe with statements of auditors and former City financial employees. If local media do not report Friday on rating agencies' poor reputation, you will know that they willingly swallowed a pre-election ploy.