Terrorism flourishes brazenly at Ground Zero in the new 7 World Trade Center building. Here can be found a secretive entity of fabulous wealth and power. Kingdoms and corporations alike tremble at its shadow and make haste to pay it tribute. I refer to Moody’s Investor Services, wholly owned subsidiary of Moody’s Corporation, which reported $2.03 billion in revenues in 2006.

On January 10 Moody’s, in concert with the other main bond-rating firm, Standard and Poor’s, gave the United States its top AAA credit rating. The terrorist blackmail threat came in the form of a demand by Moody’s that the US government “reform” Social Security and Medicare: “In the very long term, the rating could come under pressure if reform of Medicare and Social Security is not carried out as these two programs are the largest threats to the long-term financial health of the United States and to the government’s AAA rating.”

Steven Hess, Moody’s top analyst for the US economy, spelled it out more explicitly to the London Financial Times: “If no policy changes are made, in 10 years from now we would have to look very seriously at whether the US is still a triple-A credit…. The US rating is the anchor of the world’s financial system. If you have a downgrade, you have a problem.” Thus does Moody’s man calmly threaten to plant the financial equivalent of a thermonuclear device under the Statue of Liberty.

Moody’s runs a protection game. It issues credit ratings (in 2007 covering no less than 39 percent of the global credit-rating market by revenue, according to Bloomberg) based on public data and private information made available by those clients that have “voluntarily” retained its services. The price of not volunteering can be high. As vividly reported in the Washington Post by Alec Klein in 2004, the giant German insurance corporation Hannover declined repeated Moody’s offers to rate its credit. Moody’s promptly issued an unsolicited and adverse rating, and then–just like a small-time mobster after hurling a brick through the window of a liquor store–went back to Hannover and reissued its invitation to offer protection-by-rating. Hannover’s top man said he wouldn’t surrender to blackmail, and so between 2001 and 2003 brick after brick went through the window as Moody’s steadily reduced Hannover’s rating all the way down to junk.

By contrast, Enron handled relations with Moody’s with ermine gloves. Until days before Enron plunged into bankruptcy Moody’s, like S&P, gallantly refused to lower the boom by demoting bonds issued by Enron to “below-investment grade.” Banks with huge sums at stake allegedly pressured Moody’s to keep quiet, even though Moody’s had privileged access to Enron’s internal financial operations.

Today, the world’s credit system is strained to the bursting point by financial scams like collateralized debt obligations (CDOs)–bundles of debt instruments, ranging from junk bonds to subprime mortgages. Moody’s and the other rating agencies have played a crucial role in putting the CDOs together.

Of course, the terrorists in Lower Manhattan want Wall Street to get its mitts on the pools of money held in the Social Security trust funds. But if Moody’s is going to present itself as a major political player presuming to dictate national policy down the barrel of a financial gun, its executives and analysts should be hauled into the star chamber. Let’s have a war on terror and a rendition of these Moody’s executives before a special investigative committee of Congress with full subpoena power. Ask them to explain their own role in causing the financial upheavals afflicting the planet right now, due to the collapse of the housing bubble and its impact on the home mortgage market.

As Professor Robert Pollin of the University of Massachusetts remarked to me last week, “We could say the bubble and crisis occurred because outfits like Moody’s rating agency always misread the buildup of bubbles. They assume the rise in asset prices represents something fundamentally different about the economy and then open the floodgates for financial speculation. Based on this we should rather be talking about stability of US and global financial markets coming under immediate pressure due to the fact that market analysts, like Moody’s, don’t have a clue as to what they are talking about.”

The US deficit is now around $248 billion, 1.2 percent of the GDP, which is not large by recent historical measure and which presents no danger in itself to US financial soundness. But as Pollin adds, if Moody’s analysts want to discuss causes of fiscal laxity, “why not look at the Iraq War? The defense budget for 2006 was $617 billion. That is 4.7 percent of a $13 trillion GDP. Before the Iraq War, the defense budget was about 3 percent of GDP. So Iraq is costing about $150 billion annually, about 1.1 percent of GDP. And what has it accomplished? Social Security and Medicare combined were about $900 billion in 2006. Why assume we first have to attack our minimal welfare state and leave the imperial budget intact?”

In fact, it’s almost entirely Medicare, not Social Security, that accounts for the projected rising costs in our shriveled welfare state. The culprit here is not the swelling ranks of older people but the insurance and drug companies’ grip on our health system. Conversion to single-payer would mean huge savings. The United States pays around 15 percent of its GDP for healthcare, about 70 percent more than the outlay of other advanced industrial countries. Shift to single-payer and quit shoving money–4.7 percent of the GDP–down the imperial sinkhole, and there’s no fiscal crisis of any sort, short- or long-term, for Moody’s or anyone else to fret about. And in the even shorter term, if Moody’s sees fiscal crisis looming, why don’t its overpaid executives for once put the national interest first and call for a tax hike on the rich? Pollin tells me that just going back to Clinton, as opposed to Bush 2, on taxes for those making more than $200,000 a year would generate $60 billion a year. Do this and end the war in Iraq and you wipe out the deficit at a stroke.

Let a real war on terror commence.