Standard & Poor’s, the self-righteous credit-rating agency, has a damn lot of nerve. It provoked scary headlines by solemnly threatening to “short” America. That is, downgrade the credit-worthiness of US Treasury bonds unless Congress and the president oblige creditors by punishing the citizenry with severe budget cuts. What a load of crap.

The headline I would like to see is this: “S&P Execs Face Major Fraud Investigation, Take the Fifth Before Federal Grand Jury.”

News coverage on S&P’s credit warning typically failed to mention that Standard & Poor’s itself is in utter disrepute. It was an unindicted co-conspirator in the Wall Street deceitfulness that brought the nation to financial ruin. During the bubble of inflated housing prices, S&P and other rating agencies blessed the fraud-based mortgage securities issued by Wall Street banks with AAA ratings—deceiving gullible investors around the world and assuring bloated profits (and executive bonuses) for the greedy bankers. S&P provided cover for the massive scam that led to the crisis that sank the national economy.

That story line is the essential reason federal deficits soared in the age of Obama. National wealth was massively destroyed, government tax revenues collapsed, the feds spent trillions bailing out the imperiled financial system. In short, the bankers did it, abetted by see-no-evil accomplices like Standard & Poor’s.

The real explanation for the deficits has been air-brushed out of public discussion. Instead, we are witnessing another brazen scam engineered by the financial establishment—a phony political analysis that blames the victims, Americans at large who lost jobs, homes, savings and security thanks to Wall Street titans. The fiscal problem, we are told by right-handed commentary, should be blamed on big government, not big bankers. Because Washington has overreached, people must now learn to curb their appetites. Brave politicians in both parties claim they must cut healthcare and Social Security and other important guarantees in order to save the country from wrathful judgment by Standard & Poor’s. What a hoot.

The dereliction of Standard & Poor was spelled out in detail by the blistering report recently issued by the Senate Permanent Subcommittee on Investigations, chaired by Senator Carl Levin. Levin’s hearings last year established why the supposedly disinterested analysts at S&P took a dive for the bankers and handed out inflated ratings for toxic assets. They did it for the money, as witnesses acknowledged. The rating agencies are paid by the banks to do their ratings. If they refuse to stamp newly issued securities with AAA labels, the bank will take its business elsewhere. The firm loses income; executives get smaller bonuses.

This is an outrageous conflict of interest at the very heart of the financial system. Congress should have had the nerve to outlaw the practice in unambivalent terms. Instead, Congress turned the question over to federal regulatory agencies and asked them to devise a remedy. But the regulators were also among the see-no-evil accomplices that led to the crash. Senator Levin’s final report includes six recommendations urging the regulatory agencies to get tough with the inflated credit ratings, but don’t hold your breath. What’s required is a serious law that either changes the status of the rating agencies or shuts them down. Otherwise, the temptations for more deception and false assurances will be too strong to resist.

The deficit panic is itself bogus—poor-mouthing America to avoid raising taxes on the folks who got the money. Naturally, this reactionary approach was first promoted by Republicans, but has been tacitly embraced by the Democratic president and Congressional Democrats. No more talk from them about jobs, jobs, jobs or doing anything real to save millions of families from home foreclosures. Barack Obama promises to do the blood-letting more delicately than barbaric Republicans, protecting Social Security and Medicare and other much-loved programs. But can people believe him? They have been burned before by vague good talk.

If you listen closely, Obama is setting himself up to fashion another “grand compromise” with the right. He will explain this is the “adult” thing to do. But his supporters may once again see betrayal. As the polls keep reporting, the populace is overwhelmingly opposed to any political deal-making that punishes them again for a catastrophe they did not cause. People seem to know it is wrong to dump more pain on them while the real malefactors are not held accountable for their sins.

In Washington, these contrary public attitudes are dismissed as uninformed or self-indulgent. But the one thing that can save the country from the respectable wrath of Standard & Poor’s is the wrath of angry, mobilized citizens.