Investments in 38 Studios bonds are ultimately investments in the state’s ability to procure money. From the perspective of an investor concerned only about the bottom line, how a state lays claim to the money it procures may not matter all that much; a bet on a backroom deal that leads to a debt “obligation” can be just as good a bet on the legally mandated process for establishing a full faith and credit obligation, if the investor believes that the inside dealers have the power to take what they need when the time comes.

For a ratings agency, however, the issues are different. Ratings agencies that deal with public debt are supposed to be experts on government, meaning they are supposed to be experts on the processes that governments use to procure the funds to pay off their debts. This role in the financial ecosystem means that ratings agencies cannot blithely put aside questions of how governments lay claim to funding.

Assigning ratings to financial instruments means making educated guesses about the future.  Governments that follow their long-established rules to obtain a maximal level of consent from their people – the people, by the way, being the ones who create the wealth that governments procure – should be expected to have different futures than governments that assert a right to take money according to ad-hoc rules that change to suit different purposes at different times. To deny that there is any difference between different possible methods of creating debt obligation is to eschew any pretense of providing objective financial analysis, and instead promote a particular governing ideology (perhaps an ideology that’s not terribly congruent with the rule of law needed to make long-term investing possible).

Of course, ratings agencies cannot do much of anything on their own. A great deal of the power they possess in the 38 Studios matter comes from their ability to convince government leaders that the informal understandings held by the financial class about ’da way ’da world really works can and should be used to sweep aside specific provisions of the law, so that debt can more easily be imposed on the citizenry.  So far, Rhode Island executive officials like Lincoln Chafee and Gina Raimondo, and legislative leaders like Gordon Fox and Teresa Paiva-Weed have indeed taken the view that financial industry preferences take precedence over fundamental law, and there’s just nothing that can reasonably be done about it.

This idea of government will be imposed upon Rhode Islanders by their state officials and Wall Street working together, unless Rhode Islanders are willing to reject politicians who use their offices to enforce the finance industry’s extra-legal understandings of how debt should work, and reward those who work to make sure that the finance industry lives under the same constitution and laws that everyone else does.