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	Allowing the profit motive to affect access to the most basic element of life by Margaret Krome The Capital Times (Madison, Wisconsin)   Sept 2008   From India to Bolivia, water privatization fights have produced some of the most powerful protests in years and galvanized grass-roots opposition like no other issue. Indian author Vandana Shiva has written about such fights in her book, "Water Wars," and the record is mounting internationally about the profound human rights issues associated with privatized water.   Since the 1990s, the World Bank and International Monetary Fund have actively promoted water privatization in Chile, Malaysia, Argentina, the Philippines, Australia, Nigeria and many other countries, making it a condition of loans and trade agreements and otherwise asserting its central role for developing countries.   The rationale for such policies is that a stable water supply is a prerequisite to stable economic development and that many developing countries cannot afford the infrastructure to reliably provide water to all citizens. Also, government corruption can result in bad management and little accountability in providing water. The assumption is that a profit motive will prompt the private sector, especially international companies with superior technology, to perform better, and the private provision of water will allow developing countries to release their own scarce dollars to meet health, education and other urgent needs.   However, the global track record of privatized water has shown different results. In the Philippines, Manila"s private provider more than tripled the water charges workers paid and abandoned its operation when it could not negotiate another doubling of that higher amount. In Casablanca, Morocco, prices tripled. In Guinea, prices rose by 650 percent; when people could not pay those prices, thousands of people were disconnected. Such rate hikes have become a common outcome of water privatization.   Thus, private companies have indeed provided water to those who can pay much higher rates, especially in urban areas. But their performance in rural areas has drawn understandable fury from people accustomed to sourcing their own water, whose wells have dried up due to large draw-downs by private providers. Further, many of these companies insist on substantial subsidies to operate -- negating the rationale that privatization would allow developing countries to use scarce cash on education, health care and other needs.   Global climate change is clearly exacerbating the problem, as rainfall patterns change water availability in many parts of the globe. It is appalling that at this late date in human history, any question should exist about the inappropriateness of allowing profit motives to affect access to this basic element of life.
	Triple-A Failure by Roger Lowenstein New York Times   In 1996, Thomas Friedman, the New York Times columnist, remarked on “The NewsHour With Jim Lehrer” that there were two superpowers in the world — the United States and Moody’s bond-rating service — and it was sometimes unclear which was more powerful. Moody’s was then a private company that rated corporate bonds, but it was, already, spreading its wings into the exotic business of rating securities backed by pools of residential mortgages.   Obscure and dry-seeming as it was, this business offered a certain magic. The magic consisted of turning risky mortgages into investments that would be suitable for investors who would know nothing about the underlying loans. To get why this is impressive, you have to think about all that determines whether a mortgage is safe. Who owns the property? What is his or her income? Bundle hundreds of mortgages into a single security and the questions multiply; no investor could begin to answer them. But suppose the security had a rating.   If it were rated triple-A by a firm like Moody’s, then the investor could forget about the underlying mortgages. He wouldn’t need to know what properties were in the pool, only that the pool was triple-A — it was just as safe, in theory, as other triple-A securities.   Over the last decade, Moody’s and its two principal competitors, Standard & Poor’s and Fitch, played this game to perfection — putting what amounted to gold seals on mortgage securities that investors swept up with increasing élan. For the rating agencies, this business was extremely lucrative. Their profits surged, Moody’s in particular: it went public, saw its stock increase sixfold and its earnings grow by 900 percent.   By providing the mortgage industry with an entree to Wall Street, the agencies also transformed what had been among the sleepiest corners of finance. No longer did mortgage banks have to wait 10 or 20 or 30 years to get their money back from homeowners. Now they sold their loans into securitized pools and — their capital thus replenished — wrote new loans at a much quicker pace.   Mortgage volume surged; in 2006, it topped $2.5 trillion. Also, many more mortgages were issued to risky subprime borrowers. Almost all of those subprime loans ended up in securitized pools; indeed, the reason banks were willing to issue so many risky loans is that they could fob them off on Wall Street.   But who was evaluating these securities? Who was passing judgment on the quality of the mortgages, on the equity behind them and on myriad other investment considerations? Certainly not the investors. They relied on a credit rating.   Thus the agencies became the de facto watchdog over the mortgage industry. In a practical sense, it was Moody’s and Standard & Poor’s that set the credit standards that determined which loans Wall Street could repackage and, ultimately, which borrowers would qualify. Effectively, they did the job that was expected of banks and government regulators. And today, they are a central culprit in the mortgage bust, in which the total loss has been projected at $250 billion and possibly much, much more.   * Visit the link below to access the full story. Visit the related web page
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