S&P Downgrades US credit

[Jamie_B]

Would have been nice had they done their jobs when they were rating all the mortgage backed securities AAA

http://www.msnbc.msn.com/id/44040574/ns/business-stocks_and_economy/


[quote]WASHINGTON — The United States lost its top-notch AAA credit rating from Standard & Poor's Friday, in a dramatic reversal of fortune for the world's largest economy.

S&P cut the long-term U.S. credit rating by one notch to AA-plus. The credit agency said late Friday that it was making the move because the deficit reduction plan passed by Congress on Tuesday did not go far enough to stabilize the country's debt situation.
U.S. Treasuries, once undisputedly the safest investment in the world, are now rated lower than bonds issued by countries such as the United Kingdom, Germany, France or Canada.
The move is likely to raise borrowing costs eventually for the American government, companies and consumers.
"The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics," S&P said in a statement.
The decision follows a bitter political battle in Congress over cutting spending and raising taxes to reduce the government's debt burden and allow its statutory borrowing limit to be raised.
On Tuesday, President Barack Obama signed legislation designed to reduce the fiscal deficit by $2.1 trillion over 10 years. But that was well short of the $4 trillion in savings S&P had called for as a good "down payment" on fixing America's finances.
The political gridlock in Washington and the failure to seriously address U.S. long-term fiscal problems came against the backdrop of slowing U.S. economic growth and led to the worst week in the U.S. stock market in two years. The S&P 500 stock index fell 10.8 percent in the past 10 trading days.
"When they finally dealt with the debt ceiling, they obviously kicked the can down the road, and the market did not need that. I thought at the time when they released it there would have been a downgrade," said William Larkin, fixed income portfolio manager at Cabot Money Management in Salem, Mass.
"I don't think it is a great shock. If it didn't happen now, I think it probably would have happened in a couple of months.


"A double-A plus is not a big issue, but it is going to have an impact. There are going to be ripples going across the pond."
The outlook on the new U.S. credit rating is negative, S&P said, a sign that another downgrade is possible in the next 12 to 18 months.
U.S. government officials had been bracing for a downgrade.
CNBC's John Harwood reported that S&P told the federal government at 1:30 p.m. ET Friday that it was preparing to downgrade the country's rating. But Harwood reported that after U.S. officials pointed out an error in how S&P computed the ratio of U.S. debt to the gross domestic product, S&P decided to reconsider.
A source said S&P's calculations were off by "trillions," CNBC reported. A source familiar with the discussions said that the Obama administration believes S&P's analysis contained "deep and fundamental flaws."
The rating agencies have been under fire since the financial meltdown of 2008 because they often gave high ratings to bundles of mortgage-related securities that were risky and ultimately failed.
The impact of S&P's move was tempered by a decision from Moody's Investors Service earlier this week that confirmed, for now, the U.S. Aaa rating. Fitch Ratings said it is still reviewing the rating and will issue its opinion by the end of the month.
"It's not entirely unexpected. I believe it has already been partly priced into the dollar. We expect some further pressure on the U.S. dollar, but a sharp sell-off is in our view unlikely," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.
"One of the reasons we don't really think foreign investors will start selling U.S. Treasuries aggressively is because there are still few alternatives to the U.S. Treasury market in terms of depth and liquidity," Serebriakov added.
S&P's move is also likely to concern foreign creditors especially China, which holds more than $1 trillion of U.S. debt. Beijing has repeatedly urged Washington to protect its U.S. dollar investments by addressing its budget problem.
The downgrade could add up to 0.7 of a percentage point to U.S. Treasuries' yields over time, increasing funding costs for public debt by some $100 billion, according to SIFMA, a U.S. securities industry trade group.


S&P had placed the U.S. credit rating on review for a possible downgrade on July 14 on concerns that Congress was not adequately addressing the government fiscal deficit of about $1.4 trillion this year, or about 9.0 percent of gross domestic product, one of the highest since World War II.
The unprecedented downgrade of the nation's AAA credit rating by a major ratings agency comes only 15 months before the next presidential election where the downgrade and the debt will be top issues for debate.

Bitter political battles remain over the ideologically fraught issues of spending cuts and tax reform.
The compromise reached by Republicans and Democrats this week calls for the creation of a bipartisan congressional committee to find $1.5 trillion of deficit cuts by late November, beyond the $917 billion already identified.[/quote]

[Fela Kuti]

This is Washington's fault, both parties

[Jamie_B]

[quote name='Fela Kuti' timestamp='1312595804' post='1011905']
This is Washington's fault, both parties
[/quote]


Oh there is alot of blame to go around no doubt.

[CTBengalsFan]

Bout time

[|Elflocko|]

I'm actually elated to see this for wholly selfish reasons, as I'm hoping that this will tank the hostile takeover of the company I work for and prevent the virulent cunt CEO of the opposing company from procuring the needed funds to complete his evil transaction.

Fuck all of your 401K's, this is about me...

Mostly

Maybe...

[BengalRep85-9]

Boehner gets 98% of what he wanted in the debt deal then the stock market tanks immediately and our credit gets downgraded within a week...

[sois]

S&P 's name is mud. Why does anyone believe a word they say after the subprime meltdown?

[|BlackJesus|]

[center][img]http://i83.photobucket.com/albums/j318/Tredcrow/2011/latuffmarx.jpg[/img][/center]

[Jamie_B]

http://robertreich.org/post/8542550924

[quote]Why S&P Has No Business Downgrading the U.S.
FRIDAY, AUGUST 5, 2011

Standard & Poor’s downgrade of America’s debt couldn’t come at a worse time. The result is likely to be higher borrowing costs for the government at all levels, and higher interest on your variable-rate mortgage, your auto loan, your credit card loans, and every other penny you borrow.

Why did S&P do it?

Not because America failed to pay its creditors on time. As you may have noticed, we avoided a default.

And not because we might fail to pay our bills at the end of 2012 if tea-party Republicans again hold the nation hostage when their votes will next be needed to raise the debt ceiling. This is a legitimate worry and might have been grounds for a downgrade, but it’s not S&P’s rationale.

S&P has downgraded the U.S. because it doesn’t think we’re on track to reduce the nation’s debt enough to satisfy S&P — and we’re not doing it in a way S&P prefers.

Here’s what S&P said: “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.” S&P also blames what it considers to be weakened “effectiveness, stability, and predictability” of U.S. policy making and political institutions.

Pardon me for asking, but who gave Standard & Poor’s the authority to tell America how much debt it has to shed, and how?

If we pay our bills, we’re a good credit risk. If we don’t, or aren’t likely to, we’re a bad credit risk. When, how, and by how much we bring down the long term debt — or, more accurately, the ratio of debt to GDP — is none of S&P’s business.

S&P’s intrusion into American politics is also ironic because, as I pointed out recently, much of our current debt is directly or indirectly due to S&P’s failures (along with the failures of the two other major credit-rating agencies — Fitch and Moody’s) to do their jobs before the financial meltdown. Until the eve of the collapse S&P gave triple-A ratings to some of the Street’s riskiest packages of mortgage-backed securities and collateralized debt obligations.

Had S&P done its job and warned investors how much risk Wall Street was taking on, the housing and debt bubbles wouldn’t have become so large – and their bursts wouldn’t have brought down much of the economy. You and I and other taxpayers wouldn’t have had to bail out Wall Street; millions of Americans would now be working now instead of collecting unemployment insurance; the government wouldn’t have had to inject the economy with a massive stimulus to save millions of other jobs; and far more tax revenue would now be pouring into the Treasury from individuals and businesses doing better than they are now.

In other words, had Standard & Poor’s done its job over the last decade, today’s budget deficit would be far smaller and the nation’s future debt wouldn’t look so menacing.

We’d all be better off had S&P done the job it was supposed to do, then. We’ve paid a hefty price for its nonfeasance.

A pity S&P is not even doing its job now. We’ll be paying another hefty price for its malfeasance today. [/quote]

[sois]

Fuck S&P. They should be out of business.

[|Elflocko|]

[quote name='BlackJesus' timestamp='1312625623' post='1012024']
[center][img]http://i83.photobucket.com/albums/j318/Tredcrow/2011/latuffmarx.jpg[/img][/center]
[/quote]

Is Capitalism the root cause or the insatiable greed that follows it like a shadow? Or are the two inexorably linked making both theories correct?

Been a while since I've read Marx...

[Jamie_B]

[quote name='sois' timestamp='1312646313' post='1012167']
Fuck S&P. They should be out of business.
[/quote]


Agreed

[Jamie_B]

Here is the report.

http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8

Page 4 has the following...

"We have changed our assumption on this because the majority
of Republicans in Congress continue to resist any measure that would raise
revenues, a position we believe Congress reinforced by passing the act."

[ccartman2]

[quote name='BengalRep85-9' timestamp='1312603301' post='1011957']
Boehner gets 98% of what he wanted in the debt deal then the stock market tanks immediately and our credit gets downgraded within a week...
[/quote]

Blame who you want. I blame those who actually run this country.

[Vol_Bengal]

[quote name='Jamie_B' timestamp='1312668506' post='1012409']
Here is the report.

http://www.standardandpoors.com/servlet/BlobServer?blobheadername3=MDT-Type&blobcol=urldata&blobtable=MungoBlobs&blobheadervalue2=inline%3B+filename%3DUS_Downgraded_AA%2B.pdf&blobheadername2=Content-Disposition&blobheadervalue1=application%2Fpdf&blobkey=id&blobheadername1=content-type&blobwhere=1243942957443&blobheadervalue3=UTF-8

Page 4 has the following...

"We have changed our assumption on this because the majority
of Republicans in Congress continue to resist any measure that would raise
revenues, a position we believe Congress reinforced by passing the act."
[/quote]

Not to dispute your assertion that S&P is citing the lack of revenue increase in the bill as the reasoning for the drop...
But all we heard for the last 3 weeks was that if they (S&P, Moody's, et al) didn't see $4 billion in debt reduction it was going to get dropped. So... which is it? Probably both in a manner of speaking. In the long, all that it means is that your and my tax payments on debt service isn't going to go as far as it used to. Guess what, in the end the taxpayer will get banged in the ass again.

Magic - involve politicians and yet again, the American public gets screwed somehow or another. You can count on it.

[Vol_Bengal]

[quote name='BengalRep85-9' timestamp='1312603301' post='1011957']
Boehner gets 98% of what he wanted in the debt deal then the stock market tanks immediately and our credit gets downgraded within a week...
[/quote]

Your nuts...
He did the same shit Obama did... he compromised and settled. He took way less than he wanted to get a deal that would go through. The same people here are good with Obama settling to get something yet now Boehner did it and he's getting called on the carpet.

Boehner got nowhere near 98% of what he originally wanted. I'm going to ask the one other question that I just don't get... how long will it take our government to spend up to the $900 billion cap again?

1-2 years? yet, the spending cuts are factored over 10 years to make them sound better than they are.

[Vol_Bengal]

Heard this comment from Dave Ramsey last week... puts into everyday numbers what our glorious government did with the bill...

[quote]"If the US Government was a family, they would be making $58,000 a year, they spend $75,000 a year, & are $327,000 in credit card debt. They are currently proposing BIG spending cuts to reduce their spending to $72,000 a year. These are the actual proportions of the federal budget & debt, reduced to a level that we can understand." - Dave Ramsey[/quote]

[sois]

I like that. I would like to see how he would equate all the spending. What is the equivalent of all the military spending?

Like a state of the art security system, maybe a night watchman as well.

[Jamie_B]

[quote name='Vol_Bengal' timestamp='1312820655' post='1012911']
Not to dispute your assertion that S&P is citing the lack of revenue increase in the bill as the reasoning for the drop...
But all we heard for the last 3 weeks was that if they (S&P, Moody's, et al) didn't see $4 billion in debt reduction it was going to get dropped. So... which is it? Probably both in a manner of speaking. In the long, all that it means is that your and my tax payments on debt service isn't going to go as far as it used to. Guess what, in the end the taxpayer will get banged in the ass again.

Magic - involve politicians and yet again, the American public gets screwed somehow or another. You can count on it.
[/quote]


Interesting, you go straight to cuts to talk about debt reduction and not to increase in revenue as the way to reduce debt.

[Jamie_B]

[quote name='Vol_Bengal' timestamp='1312821101' post='1012915']
Heard this comment from Dave Ramsey last week... puts into everyday numbers what our glorious government did with the bill...
[/quote]


Naw I think Jon Stewart has a better analogy...

http://www.thedailyshow.com/watch/thu-june-2-2011/cantor-won-t-

[Vol_Bengal]

[quote name='Jamie_B' timestamp='1312822265' post='1012920']
Interesting, you go straight to cuts to talk about debt reduction and not to increase in revenue as the way to reduce debt.
[/quote]

I think I pretty much said there would need to be a mix of the two... whatever that balance is.

However, yes, my initial reaction to the debt issue is cuts. That is the same thing the National Commission of Fiscal Responsibility put in its report in December 2010 that was delivered DIRECTLY to the white house. This is the commission that Obama created. But, we've hashed this out already.

I have one simple question Jamie... Obama creates this commission called "National Commission of Fiscal Responsibility and Reform" to
[quote]President Obama created the bipartisan National Commission on Fiscal Responsibility and Reform to address our nation's fiscal challenges. The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. [/quote]

they release their report in December and next to none of what was recommended was done. My question is why even create the commission? You're not enacting anything that they've recommended - seems like a labor in futility. This would go for any administration - why create a commission to investigate something and then just arbitrarily dismiss any and all recommendations that are presented? Seems like a waste of time and money.

http://www.fiscalcommission.gov/


As far as job creation and such... I'm all for it, provided its done correctly. The issue arises when the federal government likes to give grants / aid to add police officers, firemen, construction, etc. and will pay for a 24-36 month period at which time they're funding goes away and the states are then on the hook to continue to fund the positions. Many states are in a financial bind because of this. It happened under Bush too. The government doesn't worry about that - they're able to toot their horn that they created x number of new jobs... never mind in 2 or 3 years the states will be on the hook to fund em.

[Jamie_B]

I think I already told you that I thought that commission was a joke.

And I agree regarding the Fed dropping funds and making the state pay for it, that's very Anti-Hamilton. Hamilton took on the debit of the states.

Remember I am a Hamilton/FDR fan, not just a liberal to be a liberal, I'm anti-neo-liberalism.

And guess what? Obama is just as neo-liberal as the rest.

[Vol_Bengal]

[quote name='Jamie_B' timestamp='1312826147' post='1012956']
I think I already told you that I thought that commission was a joke.
[/quote]

Apparently, so does Obama. But my question is - why was it created to start with? Apparently, according to you and Obama at least, it was a sham / joke from the get go... why even spend the time and money on doing anything with it?

I'm not attempting to be sarcastic at all. I just don't understand using the resources of the federal government on a project / commission / whatever that is viewed as a joke from the outset and nothing will be accomplished from it at the end.

[Jamie_B]

[quote name='Vol_Bengal' timestamp='1312826844' post='1012958']
Apparently, so does Obama. But my question is - why was it created to start with? Apparently, according to you and Obama at least, it was a sham / joke from the get go... why even spend the time and money on doing anything with it?

I'm not attempting to be sarcastic at all. I just don't understand using the resources of the federal government on a project / commission / whatever that is viewed as a joke from the outset and nothing will be accomplished from it at the end.
[/quote]


I dont think Obama thinks its a joke he just was on speaking and saying it came up with some good ideas, that gang of 6 came up with some good ideas, and that he and boehner came up with some good ideas when they met and were close to getting a deal done in the white house.

Why they havent implemented those "good ideas" is likely to due to politics would be my guess. (Which by the way if you read that report is a big reason why we got downgraded, the inability to put forth solutions.)

[Fela Kuti]

What a fucking bloodbath today, over 5% down I'm kicking myself for not selling earlier