S&P Seen Surrendering to Tea Party Costing U.S. Taxpayer
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PostPosted: Mon, Aug 8 2011, 10:35 pm EDT    Post subject: S&P Seen Surrendering to Tea Party Costing U.S. Taxpayer Reply with quote

S&P Seen Surrendering to Tea Party Costing U.S. Taxpayer
By Zeke Faux - Aug 8, 2011 12:22 PM ET

Standard & Poor’s, the rating company that downgraded the debt of the United States to AA+ from AAA for the first time, now finds itself assailed by investors led by billionaire Warren Buffett for making a political decision that has more to do with Tea Party politics than the financial stability of the U.S.

S&P officials, shrugging off a $2 trillion calculation error, blamed “uncertainty” in the policymaking process on Aug. 5 when they cut the assessment of the U.S. government’s ability to pay its debt, citing Congress’s failure to agree on as much long-term deficit reduction as the credit-rating company wanted. Buffett, the world’s most successful investor, said S&P erred and the U.S. should be rated “quadruple-A.”

The New York-based subsidiary of McGraw Hill Cos., whose inflated grades of mortgage-backed investments -- paid for by the banks that created the toxic debt -- were blamed by Congressional investigators for fueling the financial crisis, rattled investors around the world and provided fodder for President Barack Obama’s rivals in the 2012 elections. Treasuries rose, the dollar gained, global stock markets tumbled, oil sank and gold rallied to a record.

‘Political Decision’

“Clearly the ratings downgrade was a ‘political decision’ in the sense that the politics explained the timing of this, because the numbers have been irrefutable for a decade,” said Robert Litan, vice president for research and policy at the Kauffman Foundation in Kansas City, Missouri. “It gives an enormous amount of ammunition to the Tea Party. They said the deal didn’t go far enough and they’ll say ‘see.’”

Litan, a former consultant to the U.S. Treasury, said yesterday in a telephone interview that he agreed with the downgrade, if not the timing. “The charts that show exploding deficits have been around for over a decade,” he said.

S&P’s decision was at odds with the other two main ratings companies, Moody’s Investors Service and Fitch Ratings. Moody’s reiterated its top Aaa rating for the U.S. today, citing the dollar’s status as the main reserve currency.

The new rating from S&P is the second-highest and puts the U.S. on the same level as Belgium and New Zealand, and above Japan and China. Under S&P’s definitions, debt rated AA is barely different from AAA securities and shows that a borrower’s ability to “meet its financial commitment on the obligation is very strong.”

Market Reaction

“I think S&P has demonstrated some spine; they finally got it right,” Bill Gross, the manager of the world’s biggest bond fund and co-chief investment officer at Pacific Investment Management Co. who has been critical of Treasuries for months, said in a Bloomberg Television interview with Tom Keene yesterday. The U.S. has “enormous problems,” he said, referring to the country’s mounting debt.

Gold futures surged to a record $1,718.20 an ounce as demand increased for a psychological store of value. Gold, one of 118 elements in the periodic table, pays no interest or dividends like equity or debt.
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http://www.bloomberg.com/news/2011-08-08/s-p-seen-surrendering-to-tea-party-at-expense-of-u-s-taxpayer.html
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PostPosted: Wed, Aug 10 2011, 8:30 am EDT    Post subject: Re: S&P Seen Surrendering to Tea Party Costing U.S. Taxpayer Reply with quote

Aren't they the same idiots who let this mess happen all these years already?
What do they know?
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PostPosted: Wed, Aug 10 2011, 8:47 am EDT    Post subject: Re: S&P Seen Surrendering to Tea Party Costing U.S. Taxpayer Reply with quote

publius wrote:
Aren't they the same idiots who let this mess happen all these years already?
What do they know?


The difference is those companies were paying them to maintain good ratings and the US doesn't pay them squat. And they are still bitter about being called to the mat by Congress after the meltdown.
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PostPosted: Thu, Aug 11 2011, 5:43 pm EDT    Post subject: Re: S&P Seen Surrendering to Tea Party Costing U.S. Taxpayer Reply with quote

Guest wrote:
publius wrote:
Aren't they the same idiots who let this mess happen all these years already?
What do they know?


The difference is those companies were paying them to maintain good ratings and the US doesn't pay them squat. And they are still bitter about being called to the mat by Congress after the meltdown.


This is just a case of tit for tat?
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