S&P Downgrade of U.S. Credit Rating

[L.Wood]

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Standard and Poor's Global Credit Portal for Aug 2011 is out. Click here
for the work entitled

....United States of America Long-Term Rating Lowered To 'AA+' On Political Risks And Rising Debt Burden; Outlook Negative

one excerpt you will rarely see quoted into today's rightist mainstream media is found on page four:

"Compared with previous projections, our revised base case scenario now
assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012,
remain in place. 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. Key
macroeconomic assumptions in the base case scenario include trend real GDP growth of 3% and consumer price inflation near 2% annually over the decade."

Thus, Republicans are denying government the tools it needs to conquer budget deficits. This led one site to post a new image for U.S.' downgrade to AA+


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Crooks and Liars weighs in on the lack of reporting about revenue refused by Republicans..click here
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Simultaneously Stephens Media columnist, John Brummett comes out today with the following article:

-- " Clintonomics: 'Neither trickle-down nor tax-and-spend"

excerpt:
"So what Clinton accomplished in 1993, without a single Republican vote, was the enactment of an economic plan that raised the top marginal tax rate on the very highest income category and, on the other side, reduced the rate of spending growth in several strategically selected areas.

Then he went along with reforming welfare in a way that reduced spending and human dependence, incurring the fleeting wrath of his left flank.

And what happened? Only the 1990s boom. Only a budget surplus. Only a paying down of the debt." Las Vegas Review-Journal

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[L.Wood]

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Who rates the rating agencies?

"Govt Officials: US Expecting S&P Downgrade -- Based on 'Serious Mistake' in Analysis*
August 05, 2011

"Two government officials tell ABC News that the federal government is expecting and preparing for bond rating agency Standard & Poor’s to downgrade the rating of U.S. debt from its current AAA value.

Official reasons given, one official says, will be the political confusion surrounding the process of raising the debt ceiling, and lack of confidence that the political system will be able to agree to more deficit reduction. A source says Republicans saying that they refuse to accept any tax increases as part of a larger deal will be part of the reason cited. The official was unsure if the bond rating would be AA+ or AA.

A third official says that S&P made a "serious mistake" in its analysis, "based on flawed math and assumptions," so the Obama administration is pushing back. But even though "S&P has acknowledged its numbers are wrong, it's unclear what they're going to do.," the official said.

S&P's numbers were off by "roughly $2 trillion," the official said.

S&P refused to comment."

Jake Tapper, ABC NEWS

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[L.Wood]

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Why Congress and S&P Deserve Each Other
Posted by Bill Saporito Monday, August 8, 2011

Having Standard & Poor's downgrade the creditworthiness of the U.S., and warn the country about further downgrades, is a little like having the Catholic Church lecture Scout leaders on the proper behavior toward boys. The moral authority seems to be wanting. S&P, you may recall, is one of the ratings agencies (the others being Moody's and Fitch) that greased the skids of the financial crisis by awarding AAA ratings to tranche after tranche of mortgage bonds called collaterized debt obligations, or CDOs. Recall that, unlike U.S. Treasuries, backed by the full faith and credit of the U.S., CDOs were underwritten by garbage mortgages — that is, backed by no-documentation “liar loans” and other Alt-A subprime pond scum handed to borrowers who otherwise couldn't get a nickel's worth of credit at their local dry cleaner.

S&P stamped CDOs with the same grade it previously awarded to a precious few companies, including Exxon and Microsoft. More than 30,000 CDOs got the AAA blessing from the agencies. S&P couldn't pull its snout out of the trough even when it became apparent in 2007 that the mortgage bond pig-out was over. This e-mail from an S&P employee, uncovered by a congressional investigation, says it all: “Let's hope we are all wealthy and retired by the time this house of cards falters.” In their absorbing history of the financial crisis, The Devils Are All Here, Bethany McLean and Joe Nocera bared the behavior of the agencies. Even when their own analysts began sounding the alarm, senior management refused to stop the money machine. And if the analysts became insistent on being scrupulous, the agencies got new analysts. Why? Because their clients, big banks such as Lehman Brothers and Goldman Sachs, demanded that the CDO machine keep on cranking, until it utterly collapsed.

Read more: Time, Aug 8, 2011

[L.Wood]

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Take that S&P.

Moody's has just come out and affirmed the US AAA ratings, saying it expects "further fiscal measures" and due to the country's reserve status.


http://www.businessinsider.com/moodys-a ... ing-2011-8

[L.Wood]

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The Economic Illiterates Step Up the Attack on Social Security and Medicare
Monday 8 August 2011

Standard & Poor's (S&P) downgrade of US debt should be seen as the joke it is. The rating agency, which gave investment grade ratings to hundreds of billions of dollars of subprime mortgage-backed securities, made an accounting error of $2 trillion in doing its assessment of the US financial situation.

However, when this error was called to S&P's attention, it still went ahead with the downgrade. Just like the war in Iraq, the policy was decided in advance of the evidence.

The nonsense with the S&P downgrade is yet another distraction - after four months of haggling over the debt ceiling idiocy - from the real problem facing the country: a downturn that has left 25 million people unemployed, underemployed or out of the labor force altogether. Tens of millions of people are seeing their career hopes and family lives wrecked by the prospect of long-term unemployment.

The incredible part of this story is that the people who are responsible are all doing just fine, and most of them are still making policy.

http://www.truth-out.org/economic-illit ... 1312813525

[L.Wood]

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Subprime Mortgage Bonds Getting AAA Rating S&P Denies to U.S. Treasuries
By Zeke Faux and Jody Shenn - Aug 31, 2011 1:25 PM CT

Standard & Poor’s is giving a higher rating to securities backed by subprime home loans, the same type of investments that led to the worst financial crisis since the Great Depression, than it assigns the U.S. government.

S&P is poised to provide AAA grades to 59 percent of Springleaf Mortgage Loan Trust 2011-1, a set of bonds tied to $497 million lent to homeowners with below-average credit scores and almost no equity in their properties. New York-based S&P stripped the U.S. of its top rank on Aug. 5, saying Washington politics were making the country less creditworthy.

Treasuries gained about 1.95 percent and U.S. borrowing costs have fallen to record lows as investors repudiated the downgrade, according to Bank of America Merrill Lynch indexes. S&P has awarded AAAs to more than $36 billion of securities in the U.S. this year that were created by bankers who continue to gather thousands of loans, bundle them into bonds of varying risk and pay ratings firms a fee to assign credit rankings.

“Everybody has been led to believe over the years that AAA means AAA means AAA across the board,” Gregory W. Smith, the general counsel for the $41 billion Public Employees’ Retirement Association of Colorado, said in a telephone interview on Aug. 24. “Anybody that didn’t learn in the 2008 crisis that doesn’t apply should find another line of work.”

rest on Bloomberg

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