Wealthy CEOs’ push hurts Illinois taxpayers
A group of the state’s most powerful CEOs conspired behind closed doors to drive down Illinois’ bond rating in the hope of ginning up pressure on lawmakers to slash public employee pensions. Could it be more than a coincidence that some of them stand to profit from the lower rated/higher cost bonds?
This much is clear from remarks in March by Ty Fahner, the head of the Civic Committee of the Commercial Club of Chicago – the state’s most powerful business lobbying group – that surfaced late last month: Key leaders of the Civic Committee made calls to the agencies that determine Illinois’ credit rating – a critical factor in determining the amount of interest the state must pay when it borrows.
In the video, Fahner discussed how members of the Civic Committee contacted the three major credit-rating agencies and pressed them on why they hadn’t lowered the state’s credit rating. Fahner said:
The Civic Committee, not me, but me and some of the people that make up the Civic Committee, some of the same names I mentioned before, did meet with and call, in one case it was in person, a couple of calls to Moody’s, Fitch and Standard & Poor’s, and say, ‘How in the hell can you guys do this? You’re an enabler to let the state continue.’ You keep threatening more and more and more, and I think now we’ve backed off, because we don’t want to be the straw that breaks the back, But if you watch what happened over the last few years, it’s been steadily down… We have told them that we thought they were being irresponsible, but we stopped that a couple months ago.
You can watch Fahner’s full remarks here (the key portion begins after the 46-minute mark):
Since then, two of the rating agencies have lowered the state’s credit rating. As veteran political writer Rich Miller wrote in the Chicago Sun-Times, the downgrades “have cost taxpayers millions of dollars in increased interest payments.”
The revelation has set off a storm of questions – but so far those questions have been met with silence.
The Civic Committee has been one of the loudest voices calling for drastic cuts to public employee pensions and has frequently cited the threat of a credit rating downgrade as a reason to gut workers’ hard-earned retirement security. The Civic Committee has also run a misinformation campaign aimed at depicting the average pension of $32,000 a year as “what’s wrong with state government.”
Undoubtedly, it’s an added plus that some of these corporate bigwigs may head up firmsfirms holding state bonds and would thus stand to profit from a rating downgrade – the state would have to make higher interest payments, covered by taxpayer dollars.
An article posted by AlterNet explains how the scheme is designed to hurt pensions and Illinois taxpayers:
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.
After the video surfaced, the We Are One Illinois union coalition called on Gov. Pat Quinn to conduct an investigation into the matter. This week, Progress Illinois asked Quinn, the Civic Committee and the three major credit rating agencies to comment on the matter – all of them refused.
Incredibly, this week Fahner released a statement claiming he “misspoke” and that no one connected to the Civic Committee contacted the credit ratings agencies for any reason.
Fahner’s claim can’t be taken seriously – but his actions, and those of the Civic Committee, should be.
To learn more, watch this report on WTTW-TV’s Chicago Tonight that includes an interview with AFSCME Council 31 Executive Director Henry Bayer: