Moody’s VP opens curtain on Chicago’s grim fiscal crisis: Mihalopoulos

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Like the Wizard of Oz, Moody’s Investors Service is usually faceless but wields great power, issuing booming, frightening proclamations that can seem unfair to the subjects of its decrees.

Well-known for more than 100 years in financial circles, Moody’s also has gained notoriety among the general public here recently by downgrading the credit-worthiness scores of the City of Chicago, the city’s school system and the park district to junk status.

For city government alone, getting tagged with the junk label from Moody’s could mean payments to bankers of nearly $2.2 billion, deeply worsening an already difficult fiscal crisis.


On Tuesday, an executive from the great and powerful Moody’s stepped into public view and calmly, resolutely defended the downgrades.

Rachel Cortez, a vice president and senior analyst in the firm’s Chicago office, became the face of Moody’s here when she appeared at a downtown banquet hall for a sold-out luncheon panel organized by the City Club of Chicago.

Cortez at first sounded almost apologetic, saying Moody’s is “just one voice of many” that provides nothing but “an independent, objective assessment.”

She swiftly made clear she wouldn’t back down from her firm’s grim analysis. After acknowledging that Chicago has many great economic assets, she noted unfunded pension liabilities and debt come out to roughly $26,000 for every person in town.

The figure is “the highest of any U.S. local government that we look at,” she said. That places Chicago in the worst position of 7,000 other such taxing bodies across the country.

The trigger for the recent downgrades, Cortez said, was the Illinois Supreme Court decision earlier this month striking down state employee pension changes as unconstitutional.

Mayor Rahm Emanuel — who was highly critical of the Moody’s downgrades — has said he hopes his administration’s own pension reforms would fare better against a pending court challenge.

But Cortez said the court decision in the state case “all but removes” the chances Chicago could save money by reducing pension benefits and get away with it.

If there was any consolation, it was Cortez’s clarification that the current bond rating from Moody’s means the odds of the city reneging on its deals with creditors within the next three years is only 5 percent. She said Moody’s is “by no means saying the city is about to default.”

As some in the audience lobbed sharply worded questions at her, Cortez continued to be more Joe Friday than wonderful wizard, sticking to the facts.

Panel moderator Paul Green, who read the questions, said Phoebe Selden wanted Cortez to explain how Moody’s could justify such a low rating and why the firm based its downgrades on “speculation rather than actual facts or events.”

Selden is a former city comptroller who started the Moody’s office here and now works for Acacia Financial Group Inc. — an adviser on the Board of Ed’s most recent bond sale, according to public records and her online resume. She left the banquet hall before I could find her and didn’t return my call Tuesday afternoon.

Cortez only seemed taken aback briefly, when she went to step down from the stage after the panel discussion ended and was met by a large media pack.

She later said she he hoped nobody had taken a photo of her deer-in-the-headlights look upon finding herself encircled by the scrum of reporters and TV cameras.

Asked about Emanuel’s criticisms, she again emphasized that Moody’s merely makes observations relying on “basic mathematics” and doesn’t try to dictate public policy.

“We are not trying to force the city to do anything,” she said.

Something has to be done — unless you’re among those who think we should pay no attention to the woman who stepped out from behind the curtain Tuesday.

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