Why S&P Has No Business Downgrading the U.S.

[There Is No Spoon]

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.

...

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.

http://robertreich.org/post/8542550924

[jaxx]

<..> Despite the downgrade, the Federal Reserve said banks and other institutions it regulates issued would not have to make any changes to comply with regulations on risk-based capital.

"The treatment of Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities under other federal banking agency regulations ... will also be unaffected," they added.
http://www.msnbc.msn.com/id/44040574/ns/...jzNRWF5p7k

Looks like the treasury thinks it's bogus too.

[nofurylike]

those PsOS. that just plain fits that repugs-as-abusers profile that was posted here the other day.

i hate them for making me hate.

EXCELLENT analysis!! thank you for posting that, TINS!

you think that Richard Koch of S&P is one of THE Kochs? second cousin or something?

just wondering out loud ....

[nofurylike]

US media concerned over rating downgrade

http://www.google.com/hostednews/afp/art...1cef25.331

AFP) – 2 hours ago
WASHINGTON —

-snip-

"On one hand, there is a case to be made that the madness of the right has made America a fundamentally unsound nation," wrote liberal economist Paul Krugman, a Nobel Prize winner, in the New York Times.

"And yes, it is the madness of the right: if not for the extremism of anti-tax Republicans, we would have no trouble reaching an agreement that would ensure long-run solvency," he said, referring to protracted negotiations on the US debt ceiling in which conservative Republicans insisted on deep budget cuts.

But Krugman also questioned the agency's ability to assess sovereign ratings, saying: "it?s hard to think of anyone less qualified to pass judgment on America than the rating agencies."

"The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?," Krugman asked.

-snip-

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